Sinking funds are attractive to both issuing firms and investors because:
- They give an orderly repayment of a bond issue
- They aid the market price of the bond due to the fact that they lower the risk the bond will not be repaid.
- They lower the risk the bond will not be repaid.
What Is a Sinking Fund?
A sinking fund is known to be a type of fund that has money set aside or that has been saved to pay off a kind of debt or bond.
A firm that gives debt will be required to pay that debt off in the future, and the sinking fund is one that helps to reduce the hardship of a large kind of revenue.
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