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Question:

Which of the following is a disadvantage to bondholders if a bond has a sinking fund provision?

A Greater reinvestment risk.
Explaination

Reinvestment risk is a disadvantage of a sinking fund provision. Some bondholders will be repaid the bond principal earlier than the maturity date. If interest rates have declined since they bought the bonds, these bondholders will only be able to reinvest the returned principal at a lower rate of return. A sinking fund provision increases the credit quality of an issue and typically does not affect a bonds taxable status.