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Basic Question 4 of 16
A ______ provision gives the corporation the option to force retirement of the entire debt issue prior to maturity, whereas a ______ provision gives the bondholder the same option.
B. sinking fund; put
C. put; call
D. call; put.
E. call; sinking fund
A. sinking fund; call
B. sinking fund; put
C. put; call
D. call; put.
E. call; sinking fund
User Contributed Comments 3
| User | Comment |
|---|---|
| danlan | Sinking fund is an obligation to pay principals before maturity date in order to reduce loss of default risk (if default happens), call and put are two options for issuers and investor. |
| woori | sinking fund is all about reducing loss of default risk by paying out. |
| 2014 | If sinking fund is there, then it must be used irrespective of default. You don't have to wait untill default happens and use sinking fund. Meeting Sinking Fund regularly ensures credit risk is minimized. Thats why at the time of issue, issuer needs to mention in indenture about sinking fund. Because sinking fund credit risk is reduced. So now maintain low credit u must meet sinking fund requirements before default |
Your review questions and global ranking system were so helpful.
Lina
Learning Outcome Statements
describe fixed-income securities with embedded options;
CFA® 2025 Level II Curriculum, Volume 4, Module 28.