A sinking fund can be set up in one of two ways:
(1) The corporation makes annual payments to the trustee, who invests the proceeds in securities
(frequently government bonds) and uses the accumulated total to retire the bond
issue at maturity.
(2) The trustee uses the annual payments to retire a portion of the issue each year, either calling
a given percentage of the issue by a lottery and paying a specified price per bond or
buying bonds on the open market, whichever is cheaper.
Discuss the advantages and disadvantages of each procedure from the viewpoint of both the
firm and its bondholders.
2007-05-20 09:37:46 · 1 answers · asked by marianne d 2 in Business & Finance ➔ Other - Business & Finance
Generally the benefits for the company is greater desirability of it debt in the market place.
The bondholders have a better guarantee that they will get their money back.
See below.
Now do your own research paper.
2007-05-21 21:31:15 · answer #1 · answered by SPLATT 7 · 0⤊ 0⤋