Sinking Fund (Noun)
Meaning
A fund accumulated regularly in a separate account and used to redeem debt securities.
Classification
Nouns denoting possession and transfer of possession.
Examples
- The bond issuer established a sinking fund to repay the principal amount of the debt over its 10-year term.
- The company set aside a portion of its annual budget to contribute to the sinking fund for its outstanding bonds.
- As part of the bond agreement, the city was required to make annual deposits into the sinking fund to ensure timely repayment of the principal.
- The municipality accumulated a sinking fund to redeem its outstanding debt securities in advance of the maturity date.
- By setting up a sinking fund, the corporation was able to prepay a significant portion of its long-term debt and avoid accrued interest payments.