If a bond issue has a sinking fund provision then

Question

Quizplus · Accepted Answer

A sinking fund provision requires the corporation to make payments (usually on a preconceived schedule) into a fund that is used to retire the bond issue by purchasing bonds in the marketplace. The trustee manages the sinking fund and assures that it is used according to the terms of the indenture. Option B is incorrect as it describes a put provision that allows bondholders to sell their bonds back to the issuer at a pre-identified price. Option C describes a serial bond provision where a portion of the bond principal is retired every year until the bond reaches maturity.

If a Bond Issue Has a Sinking Fund Provision Then