Debentures and Brokerage

A debenture is a certificate of loan issued by a company to raise borrowed (not owned) capital — a debenture-holder is a creditor of the company, not a part-owner as a shareholder is, and is entitled to a fixed rate of interest (not a variable dividend), payable whether or not the company earns a profit that year, and is repaid ahead of any shareholder if the company is wound up.

This mirrors the dividend-income formula of the previous section exactly, with 'interest' in place of 'dividend' — again always calculated on face value, never market value.

Brokerage is the commission a stockbroker charges an investor for buying or selling shares/debentures on their behalf, usually quoted as a small percentage of the market (transaction) value, or as a fixed rupee amount per share/debenture. Brokerage is always added to the market price when buying (raising the investor's real cost) and subtracted from the market price when selling (lowering the investor's real proceeds) — brokerage is a genuine transaction cost either way, never a benefit to the investor.