Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 5: 7DQ (page 524)

What is the purpose of serial repayments and sinking funds? (LO16-1)

Short Answer

Expert verified

The purpose of serial payments is to make payments in installments, whereas sinking funds keep aside the funds to retire the debts.

Step by step solution

01

Retirement of bonds

Retirement of bonds refers to the stage where the corporations repay their bondholders when they reach maturity date.

02

Purpose of serial repayments and sinking funds

The primary purpose of serial repayments is to make payments in installments to the bondholders over the life of the issue.

In contrast, the debts are retired under sinking funds through semiannual or annual contributions made by the corporations into a fund formed explicitly for debt retirement.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Corporate debt has been expanding very dramatically in the last three decades. What has been the impact on interest coverage, particularly since 1977? (LO16-1)

The Pioneer Petroleum Corporation has a bond outstanding with an \(85 annual interest payment, a market price of \)800, and a maturity date in five years. Find the following:

a. The coupon rate.

b. The current rate.

c. The yield to maturity

Midland Corporation has a net income of \(19 million and 4 million shares outstanding. Its common stock is currently selling for \)48 per share. Midland plans to sell common stock to set up a major new production facility with a net cost of \(21,120,000. The production facility will not produce a profit for one year, and then it is expected to earn a 13 percent return on the investment. Stanley Morgan and Co., an investment banking firm, plans to sell the issue to the public for \)44 per share with a spread of 4 percent.

a. How many shares of stock must be sold to net $21,120,000? (Note: No out-of-pocket costs must be considered in this problem.)

What is privatization?

The Pioneer Petroleum Corporation has a bond outstanding with an \(85 annual interest payment, a market price of \)800, and a maturity date in five years. Find the following:

a. The coupon rate.

b. The current rate.

c. The yield to maturity
See all solutions

Recommended explanations on Business Studies Textbooks

Operational Management

Read Explanation

Change Management

Read Explanation

Nature of Business

Read Explanation

Influences On Business

Read Explanation

Managers

Read Explanation

Business Operations

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free