A ________ is a restrictive provision in a bond indenture, providing for the systematic retirement of the bonds prior to their maturity.

Question

Quizplus · Accepted Answer

A sinking-fund requirement is a provision in a bond indenture that requires the issuer to retire a portion of the bonds systematically before their maturity by investing funds in a separate account dedicated to this purpose. This helps to mitigate default risk and provides greater assurance to bondholders. A redemption clause provides an option for the issuer to retire bonds at a specific price or yield, but it is not a requirement. Conversion feature and subordination clause are other types of bond provisions with different purposes.

A ________ Is a Restrictive Provision in a Bond Indenture