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:

Vesicles

Small cavities in volcanic rocks created by the expansion of gas bubbles during solidification of the magma.

Flow Bands

Visible layers or bands in volcanic rocks that indicate the flow direction of the magma from which the rocks formed.

Igneous Rock

Rock material that has solidified and crystallized from molten magma or lava.

High-Viscosity

A term that describes a fluid's resistance to flow, with high-viscosity fluids moving more slowly than low-viscosity fluids.