Corporations that annually retire a set portion of their long-term debt are said to be using:
A) indexed bonds.
B) sinking funds.
C) convertible debt.
D) secured debt.

Question

Quizplus · Accepted Answer

Corporations that retire a set portion of their long-term debt annually are using sinking funds. A sinking fund is a separate account managed by the corporation or trustee, where funds are set aside to pay off a portion of the outstanding bond issue every year. This helps to reduce the risk for the bondholders and gives the corporation a means to retire the debt fully or partially before maturity. Indexed bonds are debt instruments whose interest rate is linked to a specified index, convertible debt can be converted into equity, and secured debt is backed by collateral.

Corporations That Annually Retire a Set Portion of Their Long-Term