- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 2. Fixed-Income Cash Flows and Types
- Subject 1. Fixed-Income Cash Flow Structures
CFA Practice Question
Serial numbers 1000-1500 identified by the random mechanism used to determine bonds retired through the sinking fund provision. Owners of these bonds will receive ______.
B. par value
C. the call price
A. the market price
B. par value
C. the call price
Correct Answer: B
The bond trustee who has determined the bonds to be retired through a lottery redeems the bonds at par value.
User Contributed Comments 4
| User | Comment |
|---|---|
| johntan1979 | Bad luck to whoever got drawn. Should be called Russian roulette instead of lottery. |
| Teeto | well don't see how it is bad. You invest at long-term rate which is usually higher than short-term one, but after one year get your investment back + long-term rate based coupon. The reinvestment is a risk but it has both upside and downside risks so I see it like net is zero. |
| sshetty2 | good insight here |
| cosmos1994 | Its only bad if u cant reinvest the capital at the rate which is greater than or equal to the rate you are getting |