Although Bond Principal Is Technically Not Repaid Until Maturity, Sinking

question 3

Multiple Choice

Although bond principal is technically not repaid until maturity, sinking funds reduce bondholder risk by requiring the borrower to make periodic payments to a bank for principal retirement. The same can be accomplished by:

• A)randomly calling in bonds for earlier retirement.
• B)issuing serial bonds which spread the principal repayment over a number of years.
• C)Either of the above
• D)None of the above