Which of the Following Statements Regarding Sinking Fund Provisions Is

question 49

Multiple Choice

Which of the following statements regarding sinking fund provisions is false?

• A) With a sinking fund, if a bond is trading at below its face value, because the bonds are repurchased at par the decision as to which bonds to repurchase is made by lottery.
• B) With a sinking fund, instead of repaying the entire principal balance on the maturity date, the company makes regular payments into a sinking fund administered by a trustee over the life of the bond.
• C) Sinking fund provisions usually specify a minimum rate at which the issuer must contribute to the fund.
• D) Because the sinking fund allows the issuer to repurchase the bonds at par, the option to accelerate the payments is another form of call provision.

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Definitions:

Turn Over

The process of replacing or renewing something to restore freshness or to provide consistency.

Tropical Biome

A biome characterized by a warm climate year-round, significant rainfall, and a high level of biodiversity, typically located near the Equator.

Grasses

Plants belonging to the family Poaceae, characterized by narrow leaves growing from the base.

Savanna

Tropical biome dominated by grasses with a few scattered shrubs and trees.