A sinking fund:

Question

A sinking fund:

Quizplus · Accepted Answer

A sinking fund is a special fund set up by an issuer of bonds to retire a portion of the bond issue over time. The fund is used to systematically set aside money to retire (buy back) a portion of the bond issue before the bond maturity date. This helps to reduce the overall risk of default and provides investors with more security. The use of a sinking fund requires the issuer to make regular payments into the fund, which are used to retire a specified number of bonds each year. The purpose of the sinking fund is to conserve cash over time and help the issuer meet its debt obligations more easily.

A Sinking Fund