Which of the Following Statements Concerning the Use of Sinking

Multiple Choice

Which of the following statements concerning the use of sinking funds to repurchase a bond issue is most correct?

A) The firm makes a single payment into a sinking fund administered by a trustee at the beginning of the life of the bond.
B) The firm can reduce the amount of outstanding debt without affecting the cash flows of the remaining bonds.
C) Payments into the sinking fund are held in reserve to protect the firm from default.
D) Bonds can be issued with a sinking fund provision or a call provision,but not both.
E) Sinking fund provisions require the issuer to repay the entire principal balance on the maturity date.