Multiple Choice
Even though many bonds have deferred sinking funds, the sinking fund has the following effects on bondholders:
A) provides extra protection to bondholders as both an early warning system and perhaps some collateral cash and provides an option to the firm to buy bonds at the lower of market or face value.
B) puts the bondholders at added risk due to potential inability to meet sinking fund payments.
C) provides an option to the firm to buy bonds at the lower of market or face value.
D) provides an option to the firm to buy bonds at the lower of market or face value and puts the bondholders at added risk due to potential inability to meet sinking fund payments.
Correct Answer:
Verified
Correct Answer:
Verified
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