Refunding involves replacing existing debt with new debt, usually to take advantage of lower interest rates.
B is correctbecause the company issues new bonds to pay off the existing debt.
Ais incorrect as refunding involves issuing debt, not equity.
Cis incorrect because the company is not obligated to buy back bonds at a discount.
Dis incorrect because a sinking fund is used for gradual repayment, not refunding.
[Reference:SIE Study Guide, Chapter 3: Corporate Bonds, , , ]
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