Which of the following statements is most correct?
A) Retiring bonds under a sinking fund provision is similar to calling bonds under a call provision in the sense that bonds are repurchased by the issuer prior to maturity.
B) Under a sinking fund, bonds will be purchased on the open market by the issuer when the bonds are selling at a premium and bonds will be called in for redemption when the bonds are selling at a discount.
C) The sinking fund provision makes a debt issue less risky to the investor.
D) Both statements a and c are correct.
E) All of the statements above are correct.

Question

Quizplus · Accepted Answer

A sinking fund provision allows the issuer to repurchase bonds before maturity, similar to a call provision, and it reduces risk for investors by ensuring gradual repayment.

Which of the Following Statements Is Most Correct