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Bonds and Debentures

Corporations may seek to borrow money in addition to (or in lieu of) issuing stock. One method for borrowing money is to exchange the loan for a debt security that can be traded on a public market. Bonds are long-term debt securities that are secured by corporate assets. Debentures are unsecured debt securities. Owners of debt securities generally do not enjoy the same types of rights are owners of stock. However, a corporation may grant voting rights to the owners of debt securities. These owners may also have the right to redeem debt securities in exchange for stock.

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