Explanation:
A sinking fund will gradually retire a bond over time with no concern for the value of the collateral. A maintenance and replacement fund will gradually retire a bond while also maintaining the value of collateral. A make-whole call is a form of call provision that sets a floor price on the call. A debenture is a bond without any enhancing provisions.
(Book 3, Module 43.1, LO 43.g)
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Question 51
A fixed-income investor is looking for protection. He wants to buy a bond with a higher yield, but the bond needs to have a plan in place to retire the bond, while at the same time preserving the value of the collateral used to back the bond. Which provision would best suit the investor's needs?
A
A sinking fund.
B
A make-whole call.
C
A maintenance and replacement fund.
D
A debenture.
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