Which of the Following Statements Is CORRECT

question 3

Multiple Choice

Which of the following statements is CORRECT?

• A) Sinking fund provisions sometimes turn out to adversely affect bondholders,and this is most likely to occur if interest rates decline after the bond was issued.
• B) Most sinking funds require the issuer to provide funds to a trustee,who holds the money so that it will be available to pay off bondholders when the bonds mature.
• C) A sinking fund provision makes a bond more risky to investors at the time of issuance.
• D) Sinking fund provisions never require companies to retire their debt;they only establish "targets" for the company to reduce its debt over time.
• E) If interest rates increase after a company has issued bonds with a sinking fund,the company will be less likely to buy bonds on the open market to meet its sinking fund obligation and more likely to call them in at the sinking fund call price.

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Definitions:

B.F. Skinner

An American psychologist known for his work in behaviorism, emphasizing the role of reinforcement and punishment in shaping behavior.

Bandura

Albert Bandura was a psychologist best known for his work on social learning theory and for emphasizing the role of observational learning, self-efficacy, and reciprocal determinism in psychology.

Major Perspectives

Broad ways of understanding or analyzing human behavior and mental processes, including psychodynamic, behavioral, cognitive, humanistic, and biological viewpoints.

Psychodynamic

A psychological perspective that emphasizes the systematic study of the psychological forces that underlie human behavior, feelings, and emotions and how they might relate to early experience.