Question

For bonds with _________ , bond issuers are required to retire a certain percentage of bonds each year.

call provision

conversion

sinking fund

speculative grades

Answer 1

Answer is sinking fund, because in the sinking fund, amount is paid to the trustee of the bond who inturn purchases the bonds from the market in order to retire them.

The other options are not correct because -

The answer is not call provision because in call provision the bonds are called by the company at a price pre determined by the company at the time of issue. This all the bonds are called at the price decided.

The answer is not conversion because in conversion the bonds are not repaid but are converted into some other kind of instruments, generally equity

The answer is not speculative grades, because speculative grades bonds are bonds with low credit rating and have a higher risk of non repayment of bonds because of cash flow and other issues with the issuer of the bonds. No funds are set aside for repayment in such type of bonds due to cashflow issues.