Question

Assertion (A): Interest on bearer debentures is paid to a person who produces the interest coupon attached to such debentures.

Reason (R): Bearer debentures are transferred by way of delivery and the company does not keep any record of these debenture holders.

Choose the correct option from the following: 

Options

• Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A).

• Both Assertion (A) and Reason (R) are correct but Reason (R) is not the correct explanation of Assertion (A).

• Assertion (A) is correct, but Reason (R) is incorrect.

• Assertion (A) is incorrect, but Reason (R) is correct. 

Answer 1

Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A). 

Explanation:

1. Assertion (A): The person who produces the interest coupon receives interest on bearer debentures. Bearer debentures do not require ownership registration, and the coupon holder receives interest.
2. Reason (R): The corporation does not track bearer debenture holders because they are delivered. It is also true because bearer debentures are negotiable, and ownership shifts upon delivery.