Even Though Many Bonds Have Deferred Sinking Funds, the Sinking

question 96

Multiple Choice

Even though many bonds have deferred sinking funds, the sinking fund has the following effects on bondholders:
I. Provides extra protection to bondholders as both an early warning system and perhaps some collateral cash
II. Provides an option to the firm to buy bonds at the lower of market or face value
III. Puts the bondholders at added risk due to potential inability to meet sinking fund payments

• A) I and II only
• B) III only
• C) II only
• D) II and III only

---

Definitions:

Z

'Z' often represents the Z-score in statistics, which is the number of standard deviations a data point is from the mean of the data set.

Square

A polygon with four equal sides and four right angles.

Relationship

How two or more notions, entities, or persons are associated, or the status of association.

Populations

The whole set of individuals or objects of interest in a particular study or statistical analysis.