Sinking Funds Are Provisions Included in Bond Indentures That Require

Sinking funds are provisions included in bond indentures that require companies to retire bonds on a scheduled basis prior to their final maturity.Many indentures allow the company to acquire bonds for sinking fund purposes by either (1)purchasing bonds on the open market at the going market price or (2)selecting the bonds to be called by a lottery administered by the trustee,in which case the price paid is the bond's face value.