Question 1: A sinking fund

A.

shortens a bond issue’s effective maturity

B.

lengthens a bond issue’s effective maturity

C.

gives the firm the option to “get out from under” the covenants in a debt issue

D.

is an option to repay debt

E.

A and B

F.

A and C

G.

A and D

H.

B and C

I.

B and D

J.

C and D

K.

all but A

L.

all but B

M.

all but C

N.

all but D

O.

all are true

P.

none are true

A.

The replacement debt it uses must be the debt-service-parity alternative used to measure the net advantage of refunding

B.

The net advantage of refunding must be positive

C.

The firm issues new debt and repays the existing debt issue

D.

The firm must use the debt issue’s call provision

E.

A and B

F.

A and C

G.

A and D

H.

B and C

I.

B and D

J.

C and D

K.

all but A

L.

all but B

M.

all but C

N.

all but D

O.

all are true

P.

none are true