sinking fund

a fund to extinguish an indebtedness, usually a bond issue.
[1715-25]

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Fund set aside by a corporation or government agency for the purpose of periodically redeeming bonds, debentures, and preferred stocks.

The fund is accumulated from earnings, and payments into the fund may be based on either a fixed percentage of the outstanding debt or a fixed percentage of profits. Sinking funds are administered separately from the corporation's working funds by a trust company or trustee. The purpose of a sinking fund is to assure investors that provision has been made for the repayment of bonds at maturity.

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      fund accumulated and set aside by a corporation or government agency for the purpose of periodically redeeming bonds, debentures, and preferred stocks. The fund is accumulated from earnings, and payments into the fund may be based on either a fixed percentage of the outstanding debt or a fixed percentage of profits. Sinking funds are administered separately from the corporation's working funds by a trust company or a sinking-fund trustee.

      The funds may be used immediately to retire the bonds for which the fund was established; however, in most cases sinking-fund administrators opt to save money by investing the fund in conservative bonds purchased on the open market. Revenues from these investments are then added to the fund; for example, $1,000,000 can be added to the sinking fund at a cost of only $500,000 if bonds can be purchased at a 50 percent discount to the face value. The purpose of a sinking fund is to assure investors that provision has been made for repayment of bonds at maturity.

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Universalium. 2010.

Look at other dictionaries:

  • sinking fund — see fund 1 Merriam Webster’s Dictionary of Law. Merriam Webster. 1996. sinking fund …   Law dictionary

  • Sinking fund — Sinking Sink ing, a. & n. from {Sink}. [1913 Webster] {Sinking fund}. See under {Fund}. {Sinking head} (Founding), a riser from which the mold is fed as the casting shrinks. See {Riser}, n., 4. {Sinking pump}, a pump which can be lowered in a… …   The Collaborative International Dictionary of English

  • Sinking fund — Fund Fund, n. [OF. font, fond, nom. fonz, bottom, ground, F. fond bottom, foundation, fonds fund, fr. L. fundus bottom, ground, foundation, piece of land. See {Found} to establish.] 1. An aggregation or deposit of resources from which supplies… …   The Collaborative International Dictionary of English

  • sinking fund — n. a fund made up of sums of money set aside at intervals, usually invested at interest, in order to meet a specified future obligation, as the retirement of bonds at maturity …   English World dictionary

  • Sinking-fund — (engl., sinkender Fond, Tilgungsfond, Tilgungsstamm), in England das durch die jährliche Zinsersparung anwachsende Vermögen zur Verminderung der Staatsschuld, s.u. Schuldentilgung …   Pierer's Universal-Lexikon

  • Sinking fund — (engl., spr. ßingking fönnd), soviel wie Tilgungsfonds (s. d.) …   Meyers Großes Konversations-Lexikon

  • Sinking fund — (engl., spr. fönnd), s.v.w. Amortisationsfonds (s. Amortisation) …   Kleines Konversations-Lexikon

  • Sinking fund — Sinking fund, engl., Tilgungsfond …   Herders Conversations-Lexikon

  • sinking fund — sinking .fund n technical money saved regularly by a business to pay for something in the future …   Dictionary of contemporary English

  • sinking fund — sinking ,fund noun count money you save in order to pay for something in the future …   Usage of the words and phrases in modern English

  • Sinking fund — Historical ContextA Sinking Fund was a device used in Great Britain in the 18th century to reduce national debt. While used by Robert Walpole in 1716 and effectively in the 1720s and early 1730s, it originated in the commercial tax syndicates of… …   Wikipedia

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