Which One of the Following Statements Concerning Sinking Funds Is

question 113

Multiple Choice

Which one of the following statements concerning sinking funds is correct?

• A) Bond issuers must fund a sinking fund at the time the bonds are issued.
• B) Sinking funds must include at least one "balloon payment".
• C) Sinking funds must be funded annually, starting on the issue date.
• D) Sinking funds may be used to purchase bonds in the open market.
• E) Sinking funds can only be used to call bonds.

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Definitions:

Retained Earnings

The amount of net earnings not distributed to shareholders as dividends but reinvested in the business or kept as reserves.

Accumulated Other Comprehensive Income

A component of shareholders' equity on the balance sheet, representing gains and losses not reflected in net income, such as foreign currency items, unrealized gains/losses on certain investments, and pension plan adjustments.

Retractable Preferred Shares

Preferred shares that give the holder the right to require the issuer to repurchase the shares at predetermined conditions.

Future Trading

The buying and selling of financial instruments or commodities for future delivery on a futures exchange.