The Massive Steel Corporation issued bonds to finance upgrades to its

QUESTION

The Massive Steel Corporation issued bonds to finance upgrades to its aging plants. The upgrades are costly, and the bond issue is a substantial amount.

To ensure its ability to pay the bonds on maturity, Massive Steel makes annual payments to a dedicated fund. What type of bonds did the company issue?
A) convertible bonds
B) serial bonds
C) sinking-fund bonds
D) debenture bonds
E) callable bonds

ANSWER

Answer: C
Explanation: C) With sinking-fund bonds, or prerefunded bonds, the issuer makes annual deposits to a bank to accumulate funds for paying off the bonds at maturity.