As a part of a bond issue, a corporation makes annual payments into an account managed by a trustee for the purpose of repurchasing bonds. This arrangement is called:
A) a call provision.
B) a sinking fund.
C) a funding provision.
D) a trust maintenance fund.

Question

Quizplus · Accepted Answer

A sinking fund is an account managed by a trustee for the purpose of repurchasing bonds or stocks through periodic payments by the corporation. This ensures that the issuer has enough funds to cover the principal amount of the debt at maturity or at specified intervals.

As a Part of a Bond Issue, a Corporation Makes