Question

What is meant by redemption of debentures by 'Purchase in the Open Market'?

Answer 1

Redemption of debentures by purchase in open market refers to the condition when a company is authorised by its Article of Association to be able to purchase its own debentures. The debentures are purchased to serve the following purpose:

1. As a source of investment which can be sold at a higher price on a later date to earn more profit

2. To cancel debenture liabilities if the debenture rate is higher than the rate of interest in market.