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Sinking Funds and Bonds

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Compare and contrast sinking funds and bonds. What are they and why are they issued?

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Solution Summary

This solution of 250 words defines sinking funds and bonds and compare and contrasts them. It also discusses in what conditions a company uses them.

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Sinking funds: It is the amount of money that the company set aside for known future uses. For example, if a company have preferred stock, in order to ensure that dividend can be paid for preferred stock, the company may decide to set up a sinking fund. Sinking fund can also be set up in order to maintain the operations of the company. For example, if a ...

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