CFA Practice Question

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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 ______.

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
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