Definition of sinking fund

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TeachMeFinance.com - explain sinking fund



sinking fund -- a fund used to accumulate the cash needed to pay off bonds or other debt instruments, or to pay for future replacement of plant and equipment.

historic definition...

Sinking fund -- A fund to which are contributed amounts of money at specified times for the redemption of a debt. For instance, when a sinking fund is established for the redemption of an issue of bonds a certain amount of money is added to the fund each year (or at other stated intervals) until finally the fund amounts to enough to redeem (pay off) the bonds. Sometimes the money paid into a sinking fund is invested in other bonds (or other securities) the interest payments (or dividends) received from which help to swell the sinking fund. It is not infrequently the case that a sinking fund is established to redeem drawn bonds ; see Drawn bond.



About the author

Mark McCracken

Author: Mark McCracken is a corporate trainer and author living in Higashi Osaka, Japan. He is the author of thousands of online articles as well as the Business English textbook, "25 Business Skills in English".


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