Which of the following about sinking funds is most correct?

a. Sinking fund provisions do not require companies to retire their debt; they only establish “targets” for the company to reduce its debt over time.

b. Sinking fund provisions sometimes work to the detriment of bondholders – particularly if interest rates have declined over time.

c. If interest rates have increased since the time a company issues bonds with a sinking fund provision, the company is more likely to retire the bonds by buying them back in the open market, as opposed to calling them in at the sinking fund call price.

d. Statements a and b are correct.

e. Statements b and c are correct.

Answer rating: 100% (QA)

d Statements a and b are correct Sinking funds are a type of debt retirement provisi... View the full answer