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Although Bond Principal Is Technically Not Repaid Until Maturity, Sinking

Question 58

Multiple Choice

Although bond principal is technically not repaid until maturity, sinking funds reduce bondholder risk by requiring the borrower to make periodic payments to a bank for principal retirement. The same can be accomplished by:


A) randomly calling in bonds for earlier retirement.
B) issuing serial bonds which spread the principal repayment over a number of years.
C) Either of the above
D) None of the above

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