Which of the Following Statements Best Describes Sinking Funds

question 59

Multiple Choice

Which of the following statements best describes sinking funds?

• 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 has been issued.
• B) Most sinking funds require the issuer to provide funds to a trustee, which saves 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.

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Definitions:

Obedience

Compliance with an order, request, or law, or submission to another's authority.

Volts

The unit of measurement for electric potential difference or electromotive force, symbolizing the force that drives electrons through a conductor.

Maximum Voltage

The highest electrical potential difference a device or electrical system can safely handle or operate at.

Naïve Subjects

Individuals participating in a study or experiment who have no prior knowledge or expectations about the research being conducted.