What term is used to describe an account that a bond trustee manages for the sole purpose of redeeming bonds early?

Question

Quizplus · Accepted Answer

A sinking fund is a reserve account that is set up and managed by the bond trustee for the specific purpose of redeeming bonds prior to maturity. The issuer contributes a certain amount of money to the sinking fund annually, allowing the trustee to purchase and retire a portion of the outstanding bonds on a regular basis. This helps to reduce the issuer's outstanding debt and may benefit bondholders by providing them with greater security and stability.

What Term Is Used to Describe an Account That a Bond