Asked by
Phillip Marcelle
on Dec 08, 2024
Verified
When a bond indenture includes a sinking fund provision,
A) firms must establish a cash fund for future bond redemption.
B) bondholders always benefit because principal repayment on the scheduled maturity date is guaranteed.
C) bondholders may lose because their bonds can be repurchased by the corporation at below-market prices.
D) firms must establish a cash fund for future bond redemption, and bondholders always benefit because principal repayment on the scheduled maturity date is guaranteed.
E) None of the options are true.
Sinking Fund Provision
A clause in a bond or other long-term debt instrument that requires the issuer to set aside funds regularly to repay the debt before it matures.
Bond Indenture
A legal contract specifying all the terms and conditions between a bond issuer and bondholder, including obligations, rights, and protections.
Bond Redemption
The process by which a bond issuer legally repays the principal amount of the bond to the bondholders at or before the bond's maturity date.
- Comprehend the architectural and binding elements present in bond agreements.
Verified Answer
BV
Learning Objectives
- Comprehend the architectural and binding elements present in bond agreements.