What type of financial instrument usually provides the lender with a fixed rate of interest?

Debentures secured by a fixed charge are a type of financial instrument that typically provides the lender with a fixed rate of interest. This is because debentures represent a loan made by the debenture holders to the company, and they often come with a promise to pay back the principal amount at a specified time along with a predetermined interest rate. The fixed charge means that specific assets of the company are mortgaged as security against the debentures, giving the lender a higher level of assurance and priority in the event of liquidation. This arrangement not only provides the lender with a reliable source of income through the fixed interest payments but also reduces the risk associated with the investment due to the secured nature of the instrument.

In contrast, ordinary shares do not guarantee any income since dividends can fluctuate based on the company's profit and discretion of the board. Preference shares, while they may provide fixed dividends, are not the same as debentures, as they are considered equity instruments rather than debt. Lastly, debentures secured by a floating charge do not provide a fixed rate of interest consistently, as the charge floats over the company's assets and may be less secure than a fixed charge, often leading to variable returns linked to company performance.