According to the bond holder point of view, the bonds issued with sinking fund provision are classified as __________?
Correct answer: B. less risky
- A. floating risk discount
- B. less risky
- C. more risky
- D. floating risk premium
Explanation
A sinking fund requires the issuer to retire part of the debt periodically, reducing the amount outstanding and the eventual repayment burden. This lowers the bondholder’s default risk, so such bonds are considered less risky.
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