Question: What is the effect on the yield with the bonds are having sinking-fund provisions?
Answer: Bonds, which are having the sinking fund provisions are usually have lower yield then the bond which does not have sinking fund.
Question: What is the disadvantage for the investor for having bonds with sinking fund provisions?
Answer: Since, bond can be retired early. So all the analysis done by the investor on that bond got wasted. That’s the reason it is required that these bonds have the higher coupon then the one which does not have this provision.
Question: What is the optional acceleration in case of sinking fund provision for a bond?
Answer: There is an optional acceleration feature, using this option, the issuer is free to retire more than the amount of debt the sinking fund requires and to do it at the call price set for sinking-fund payments. Of course, the firm will exercise this option only if the price of the bond exceeds the sinking-fund price, and this happens when rates are relatively low.
Question: What do you mean by a put-provision for a bond?
Answer: A bond which has put provision then the investor has the right to sell the issue back to the issuer at par value on specified dates. In this case investor has advantage, as if interest rates rise after the issue date, which reduces the value of the bond, now investor can ask the issuer to redeem the bond at par(higher than the market value).