A Bond Sinking Fund Provision Requires a Firm To

question 88

Multiple Choice

A bond sinking fund provision requires a firm to:

• A)issue bonds every year to finance interest payment on bonds.
• B)retire a portion of the bond issue each year.
• C)increase the coupon rate by one percent every year.
• D)use annual interest payments for the repayment of bonds.
• E)gradually reduce the face value of debt to the level of market value of debt.

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Definitions:

Binding Price Floor

A legal minimum price for a good or service that is set above the equilibrium price, resulting in surpluses.

Binding Price Ceiling

A government-imposed limit on how high a price can be charged for a product, set below the market equilibrium price, leading to shortages.

Decreases

A reduction in size, quantity, or degree; the opposite of increases.

Tax

A mandatory monetary fee or tax levied by a government on individuals or organizations to finance public spending.