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SIE Exam Practice Question 648

Question: 648

If interest rates __________ following a bond issue, a sinking-fund provision will allow the issuing company to reduce the interest rate risk of its bonds as it replaces a portion of the existing debt with __________ bonds.

Correct Answer: B

Explanation:

If interest rates decline following a bond issue, a sinking-fund provision will allow an issuing company to reduce the interest rate risk of its bonds as it replaces a portion of the existing debt with lower yielding bonds.

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