A Sinking Fund Allows the Issuer to ______

question 35

Multiple Choice

A sinking fund allows the issuer to ______.

• A) redeem an entire debt issue prior to maturity
• B) purchase a portion of the debt each year in the open market or call a portion of the debt for mandatory redemption
• C) call the entire debt issue
• D) accumulate interest expenses into a sinking fund account

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Definitions:

Interest Rate

The fraction of a borrowed sum that incurs interest charges for the borrower, often expressed in terms of a yearly percentage.

Investment

The process of assigning financial resources with the goal of making a profit or gaining income.

Interest

The amount paid for the use of borrowed money, typically expressed as a percentage.

Invested

The allocation of resources, typically money, into ventures with the expectation of generating income or profit.