BANKING GENERAL KNOWLEDGE
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Detailed explanation-1: -A Sinking Fund Explained While the sinking fund helps companies ensure they have enough funds set aside to pay off their debt, in some cases, they may also use the funds to repurchase preferred shares or outstanding bonds.
Detailed explanation-2: -The bond represents a debt for the issuing organization. Through the sinking fund, the company saves up money to extinguish that debt. The amount of debt that is outstanding is the difference between the money owing and the money saved at any given point in time.
Detailed explanation-3: -A sinking fund can be used to pay for home repairs, save for a new car, pay for your vacation, or cover large medical bills. By setting the money aside before you use it, you will avoid using your emergency fund unnecessarily. Plus, you give yourself more negotiating power when it is time to purchase.