Which of the Following Statements Is CORRECT

question 75

Multiple Choice

Which of the following statements is CORRECT?

• A) Most sinking funds require the issuer to provide funds to a trustee, who saves the money so that it will be available to pay off bondholders when the bonds mature.
• B) A sinking fund provision makes a bond more risky to investors at the time of issuance.
• C) Sinking fund provisions never require companies to retire their debt; they only establish "targets" for the company to reduce its debt over time.
• D) If interest rates have increased since a company issued bonds with a sinking fund, the company is less likely to retire the bonds by buying them back in the open market, as opposed to calling them in at the sinking fund call price.
• E) Sinking fund provisions sometimes turn out to adversely affect bondholders, and this is most likely to occur if interest rates decline after the bond has been issued.

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Definitions:

Keynesian Demand Management

A strategy based on Keynesian economics that entails adjusting the level of demand in the economy through monetary and fiscal policy to manage economic cycles.

Economy Control

The use of various tools and policies by a government to regulate and oversee the economy’s health and stability.

Stagflation

A condition of slow economic growth and relatively high unemployment – a period of stagnation – accompanied by rising prices (inflation).

High Unemployment Rates

A condition where a significant portion of a workforce is not employed but is actively seeking work, reflecting economic downturns or structural changes in the economy.