Asked by Eunice Gwendolyn on Apr 27, 2024
Verified
Sinking funds are devices used to force companies to retire bonds on a scheduled basis prior to their maturity.Many bond indentures allow the company to acquire bonds for a sinking fund by either purchasing bonds in the market or selecting the bonds to be acquired by a lottery administered by the trustee through a call at face value.
Sinking Funds
Sinking funds are reserve accounts set aside by an organization for the purpose of repaying debt or replacing assets in the future.
Bond Indentures
Legal documents specifying the terms and conditions under which a bond is issued, including the rights of bondholders and the duties of the issuer.
Lottery
A form of gambling involving the drawing of numbers at random for a prize, often regulated by governments.
- Acquire knowledge about the features and significance of bond provisions, for instance, call provisions and sinking funds, in bond agreements.
Verified Answer
ZK
Zybrea KnightMay 02, 2024
Final Answer :
True
Explanation :
Sinking funds are indeed used to retire bonds on a scheduled basis prior to their maturity, and bond indentures often give the company the option to acquire bonds for the sinking fund through market purchases or lotteries administered by trustees.
Learning Objectives
- Acquire knowledge about the features and significance of bond provisions, for instance, call provisions and sinking funds, in bond agreements.