Q297
Requirement of certain amount of issued bond that must be retired every year is classified as
A.
sinking fund provision
AnswerB.
sinking fund premium
C.
sinking fund discount
D.
floating fund provision
Answer: Option A
Solution
Answer: Option A
Solution:
Requirement of certain amount of issued bond that must be retired every year is classified as sinking fund provision. A provision in some bond indentures requiring the issuer to put money aside to repay bondholders at maturity. In bonds with such a provision, a fund or account is set up into which an issuer deposits money on a regular basis to repay the bond when it matures.