As a Part of a Bond Issue, a Corporation Makes

question 49

Multiple Choice

As a part of a bond issue, a corporation makes annual payments into an account managed by a trustee for the purpose of repaying bonds.This arrangement is called a:

• A)call provision.
• B)sinking fund.
• C)funding provision.
• D)trust maintenance fund.
• E)None of the above.

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Definitions:

Call

In finance, an option contract giving the owner the right, but not the obligation, to buy a specified amount of an underlying asset at a specified price within a specified time.

Put Option Contract

A financial contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time.

Exercise Price

The rate at which the owner of an option is able to purchase (in the case of a call option) or dispose of (in the case of a put option) the underlying asset.

Intrinsic Value

The actual value of a company or asset based on an underlying perception of its true value including all aspects of the business, in terms of both tangible and intangible factors.