When a Bond Indenture Includes a Sinking Fund Provision

question 47

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 are true.

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Definitions:

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