Question

Assume you are the Mayor of New Orleans and you just approved the issuance of a municipal bond of par value $23 million to pay for the repairs one of the flood management turbines in the midst of the 2020 hurricane season. Your finance executive has included a sinking fund provision in the bond contract. Which of these would you likely ask her about the bond?

1. Do you think the 2020 hurricane season will affect the maturity of the municipal bond?”
2. “Do we have enough tax receipts planned over time to pay back portions of the bond as required per year?”
3. “Do we have to repay the bond at all?”
4. “What does the call provision in a bond mean?

Answer 1

As, A mayor I would like to ask her following points about the bonds,

1.Do,we have enough tax receipts planned to pay back portion of bonds required par year. As finance executive included sinking fund provision in bonds, so we have to clarify that.

2.What are the terms and conditions for full payment of bonds ,as whether we have to pay bonds at all.