Classification of Debentures Based on Security

Debentures can be classified on various bases. When classified on the basis of security, they are divided into:

Secured Debentures: These debentures have a specific charge on the assets of the company. In case of non-payment, debenture holders can recover their dues by selling those specific assets.

Unsecured Debentures: These debentures do not have any specific charge on the assets of the company. They are also called naked debentures. These are issued purely on the basis of the creditworthiness and reputation of the company.

Analysis of Given Options

Option 1 - Redeemable: This classification is based on redemption. Redeemable debentures are those which are repaid after a specified period. This has nothing to do with charge on assets.

Option 2 - Unsecured: This classification is based on security. Unsecured debentures have no specific charge on assets. ✓

Option 3 - Specific coupon rate: This classification is based on interest payment. These debentures pay a fixed rate of interest periodically. This relates to returns, not security.

Option 4 - Zero coupon rate: This classification is also based on interest payment. These debentures don't pay periodic interest but are issued at a discount to face value. This relates to returns, not security.

Correct Answer: Option 2 (Unsecured)

Unsecured debentures are the only ones among the given options that specifically do not have a charge on the company's assets.