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The bond shrink bond: is bond that is established by using the undistributed revenue of an organization's principle bond over a period of time, in order to fund planed future capital expenses or the repayment of long term loan / debt.
A sinking fund is a means of repaying funds borrowed through a bond issue through periodic payments to a trustee who retires part of the issue by purchasing the bonds in the open market. Rather than the issuer repaying the entire principal of a bond issue on the maturity date, another company buys back a portion of the issue annually and usually at a fixed par value or at the current market value of the bonds, whichever is less.A sinking fund is an account set-up by a municipality to redeem or purchase its bonds prior to maturity. By having a sinking fund, a municipality can reduce its debt load over time, avoiding the need to finance a large lump sum when the bond reaches maturity. Typically, a municipality is required to put a certain amount in the sinking fund every year, as described by the bond offering statement. Depending on how the sinking fund is set-up, it may be used to purchase bonds on the open market, or by exercising the bond’s call feature.
In general, sinking funds benefit investors in three ways. First, the redemptions leave less principal outstanding, making final repayment more likely and thus lowering default risk. Second, if interest rates increase, thereby lowering bond prices, investors get some downside protection because the provision forces the issuer to redeem at least some of those bonds at the sinking-fund call price, which is usually par, even if the bonds are selling below par at the time. Third, sinking fund provisions create liquidity for the bond in the secondary market, which is especially good when interest rates are increasing and the bonds are less valuable -- the issuer is in the market as a buyer even when prices fall.
A bond sinking Find is a restricted or protected asset for the company setup for the purpose of buying back or redeeming the bonds payables. The company will be transferring money to a independent Trustee for this purpose.
The definition of "sinking fund CALL '
The rule allowing for the source bonds the opportunity to buy bonds outstanding bonds for a set rate campaign, using money (sinking) the source of the profits fund saved specifically for the re-purchase of the security. Because it adds doubt to investors about whether to continue to pay the bond to maturity, it is seen sinking fund call as an additional risk for investors.
We describe our online foreign exchange trading and investment in the long - 'sinking fund CALL'
Securities that have drowned extending an invitation to provide the highest revenue fund to compensate for the additional risk associated with detention. Also, if the bonds are called, they are usually pay for a call premium.
Borrowers who choose to have drowned mitigate interest rate risk fund call, allowing for the opportunity to buy back the securities outstanding and other new version with lower interest rates.
A sinking fund is a part of a bond indenture or preferred stock charter that requires the issuer to regularly set money aside in a separate custodial account for the exclusive purpose of redeeming the bonds or shares.
It is simply a restricted type of assets that the company should reserve it for the purpose of redeeming or getting back the bonds.
I agree with previous answers. I can only add that a bond sinking fund is reported on the bond issuer's balance sheet under the caption IInvestements.
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