- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 42. Fixed-Income Securities: Defining Elements
- Subject 4. Structure of a Bond's Cash Flows
CFA Practice Question
Which embedded option is most beneficial to a bond issuer?
A. A conversion privilege
B. A floor on a floating rate bond
C. An accelerated sinking fund provision
Explanation: An accelerated sinking fund provision gives the issuer an option to retire more than the sinking fund requirement. The other embedded options benefit bondholders.
User Contributed Comments 2
| User | Comment |
|---|---|
| ascruggs92 | I'd see conversion privilege as a benefit to the issuer considering it gives them a lower interest rate and a chance at not having to pay back the principal |
| sevywonder | @ascruggs92 you're right, but they're asking MOST beneficial |