Question

Calculate the amount of yearly interest payable on 9% debentures (10,000 debentures of ₹100) issued as collateral security.

• A. No Interest payable
• B. ₹90,000
• C. ₹9000
• D. ₹99000

Answer 1

The Correct Option is A

Step 1: Understand Debentures Issued as Collateral Security

Debentures issued as collateral security are held as a guarantee for a loan or obligation. They are not considered actively issued unless the borrower defaults and the lender enforces the collateral.

In accounting, no interest is payable on such debentures unless they are claimed due to a default.

Step 2: Calculate Nominal Interest (If Payable)

If the debentures were actively issued, the interest would be:

Total face value = 10,000 debentures × ₹100:

Total Face Value = 10,000 × ₹100 = ₹10,00,000

Interest rate = 9% per annum:

Yearly Interest = (9/100) × ₹10,00,000 = ₹90,000

Step 3: Determine Interest Payable

Since the debentures are issued as collateral security, no interest is payable unless the collateral is enforced (e.g., due to a default). The problem does not indicate any default.

Therefore, the interest payable is zero.

Step 4: Match with Options

Options provided:

• Option 1: No interest payable
• Option 2: ₹90,000
• Option 3: ₹9,000
• Option 4: ₹99,000

Since no interest is payable, the correct answer is Option 1: No interest payable.

Note: ₹90,000 would be the interest if the debentures were actively issued, but the collateral security condition negates this.

Final Answer

The yearly interest payable is Option 1: No interest payable.