When a Bond Indenture Includes a Sinking Fund Provision

question 126

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)firms must establish a cash fund for future bond redemption and bondholders always benefit because principal repayment on the scheduled maturity date is guaranteed.
• E)None of the options is true.

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