Question

Big Walnut Nut Company has the right to buy back its preferred stock from its preferred stockholders; however, the company will have to pay the preferred stockholders an amount greater than the par value of the preferred stock. Which type of provision does Big Walnut have in its preferred stock agreement?

a. A call provision
b. A participating provision
c. sinking fund provision

Answer 1

sinking fund provision

Step-by-step explanation:

Sinking fund provision -

It is the type of fund , where certain amount of money is kept saved which is used to pay for the debt or bond , is referred to as sinking fund provision.

The company issuing the debt is required to pay the debt in the future , where the sinking funds enable to reduce the huge outlay of the revenue.

Hence , from the given scenario of the question, the correct term is sinking fund provision.