A city government sets aside funds periodically into a special account to ensure it can repay the principal of its municipal bonds at maturity. The money in this account is invested in government bonds that pay a fixed interest rate. Is the interest earned on this sinking fund fixed?
Answer
A
Yes, because all sinking funds have fixed investments.
B
No, because the money is invested in government bonds with a variable interest rate.
C
No, because sinking funds do not earn interest.
D
Yes, because the money is invested in government bonds with a fixed interest rate.