A sinking fund refers to funds allocated to gradually retire a bond issue over time.

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A sinking fund is a type of fund that is set up to retire or pay off a bond issue progressively over time. The fund is made up of regular contributions that are set aside for that specific purpose, and these contributions are usually invested in low-risk, fixed-income securities that generate income for the fund. The use of a sinking fund reduces the risk for bond investors by providing them with greater certainty that their investment will be repaid.

A Sinking Fund Refers to Funds Allocated to Gradually Retire