Which of the following statements regarding sinking fund provisions is FALSE?
A)With a sinking fund,if a bond is trading 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.

Question

Quizplus · Accepted Answer

Sinking funds provisions do not rely on lottery systems to determine which bonds to repurchase. The decision is typically made based on a pre-determined call schedule or on a pro-rata basis.

Which of the Following Statements Regarding Sinking Fund Provisions Is