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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