A ________ is a restrictive provision on a bond which provides for the systematic retirement of the bonds prior to their maturity.
A) redemption clause
B) sinking-fund requirement
C) conversion feature
D) subordination clause

Question

Quizplus · Accepted Answer

A sinking-fund requirement is a provision on a bond that requires the issuer to regularly set aside money to retire a portion of the bond issue before maturity. This helps to reduce the risk of default and provides investors with a greater level of security. A redemption clause allows the issuer to redeem the bonds before maturity, but it is not necessarily tied to a systematic retirement plan. A conversion feature allows bondholders to convert their bonds into shares of the issuer's common stock. A subordination clause is a provision that limits the rights of certain bondholders in the event of default or bankruptcy.

A ________ Is a Restrictive Provision on a Bond Which