Of the following provisions that might be found in a bond indenture,which would tend to reduce the coupon interest rate?
A) A call provision
B) No restrictive covenants
C) A sinking fund provision
D) Change in bond rating from Aaa to Aa
E) None of the above (that is, all will increase the coupon rate)

Question

Quizplus · Accepted Answer

A sinking fund provision requires the issuer to set aside funds periodically to retire the bonds. This reduces the risk for investors and therefore, allows the issuer to offer a lower coupon rate.

Of the Following Provisions That Might Be Found in a Bond