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:

Budget Coordination

The process of ensuring all parts of an organization's budget align with its strategic and operational goals.

Large Company

A corporation that typically has a high level of capitalization, extensive operations, a large number of employees, and generates a significant amount of revenue.

Sales Forecast

An estimate of the quantity of goods or services that will be sold in a future period.

Budget Committee

A group of individuals responsible for overseeing the creation and management of an organization's financial plan or budget.