Answer: Both (a) and (b)

**Correct answer: C. Both (a) and (b)** A sinking fund requires the issuer to retire part of the bond issue over time. - This **reduces default risk** because principal is being repaid gradually, lowering the amount outstanding. - It can also provide **price support** if interest rates rise, because the issuer or trustee must buy bonds for retirement, creating demand for the issue. So both listed advantages are correct.

Author: Manit Arora