When a Bond Indenture Includes a Sinking Fund Provision

question 35

Multiple Choice

When a bond indenture includes a sinking fund provision

• A) firms must establish a cash fund for future bond redemption.
• B) bondholders always benefit,because principal repayment on the scheduled maturity date is guaranteed.
• C) bondholders may lose because their bonds can be repurchased by the corporation at below-market prices.
• D) both a and b are true.
• E) none of these are true.

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