A provision in the bond indenture that forces the corporation to make arrangements for bond repayment before the maturity date is called a(n)________ fund.

Question

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A sinking fund is a provision in the bond indenture that requires the issuer to periodically set aside funds for the eventual repayment of the bond principal before maturity. This reduces the risk for bondholders by ensuring that the issuer is actively working towards repaying the bond.

A Provision in the Bond Indenture That Forces the Corporation