Which of the Following Statements Regarding Sinking Fund Provisions Is

question 64

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:

Deontological Theory

An ethical theory that suggests actions are morally right or wrong based on adherence to rules or duties, regardless of the outcomes.

Consequences

The outcomes or effects that result from a particular action or set of actions, often used in moral and ethical considerations to evaluate the rightness of actions.

Categorical Imperatives

Fundamental principles in Kantian ethics that dictate how one should act, regardless of personal desires or goals.

Reason and Emotion

The interplay between cognitive processes of logical thinking and the subjective experience of feelings, both influencing human decision-making and behavior.