Sinking fund bonds reduce the bondholder's risk by requiring the issuer to create a fund of assets to repay the bonds at maturity.

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Sinking fund bonds require the issuer to set aside funds over time to ensure there is enough money to repay the bondholders at maturity. This reduces the risk for bondholders because they are more likely to receive their principal back when the bond matures.

Sinking Fund Bonds Reduce the Bondholder's Risk by Requiring the Issuer