Even Though Many Bonds Have Deferred Sinking Funds, the Sinking

question 30

Multiple Choice

Even though many bonds have deferred sinking funds, the sinking fund has the following effects on bondholders:

• A)provide extra protection to bondholders as both an early warning system and perhaps
• Some collateral cash.
• B)provides an option to the firm to buy bonds at the lower of market or face value.
• C)put the bondholders at added risk due to potential inability to meet sinking fund payments.
• D)Both A and B.
• E)Both B and C.

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Definitions:

Acquired Needs Theory

A psychological theory that suggests individuals are motivated by their desires for achievement, affiliation, and power, which they acquire over time based on their life experiences.

Need for Affiliation

A person's inherent desire to feel connected to others, seeking social bonds and meaningful relationships.

Need for Achievement

A psychological trait that drives individuals to achieve goals and excel in their endeavors.

Desire to Excel

The strong motivation or ambition to surpass others or oneself in performance or achievement.