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Basic Question 7 of 9
Which of the following is NOT a duty of a trust company appointed when bonds are issued?
II. Managing the sinking fund
III. Deciding when the bonds should be called
IV. Monitoring the protective covenants for the bondholders
V. Representing the bondholders in default
I. Making sure the terms of the indenture are obeyed
II. Managing the sinking fund
III. Deciding when the bonds should be called
IV. Monitoring the protective covenants for the bondholders
V. Representing the bondholders in default
User Contributed Comments 10
| User | Comment |
|---|---|
| chenyx | It is iusser decides when the bonds should be called rather than trust company. |
| quynhnk79 | How about II? Does it manage the sinking fund? Pls help! |
| saji | Yes of course. the trustee manage the sinking fund. Thats one of their functions. That's why it is NOT the answer. |
| thekapila | well sinking fund management could be one of the indenture as you might have answered in question 3-. So trustee will do whatever is in indenture. |
| ritesh2919 | good one |
| vitbup | III. cos they are just representative. |
| cong | Trustees do not dictate the actions of the issuer. That's why III is false. |
| cmon | Yeah!! I got it |
| gill15 | I would not have guess Manage the sinking fund either. I could see the Trustee overseeing the fund and making sures it in good condition. But managing(being able to decide how to change it) doesnt seem right. I think managing here just means overseeing it. |
| AmirSh | Trustees act in a fiduciary capacity |
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Tamara Schultz
Learning Outcome Statements
describe the contents of a bond indenture and contrast affirmative and negative covenants
CFA® 2025 Level I Curriculum, Volume 4, Module 1.