ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Saving money over time for a large purchase is a sinking fund. The percentage earned on invested principal is an interest rate. The First Foundation is to save a $500 emergency fund. To have a negative savings rate means spending more money than you make and acquiring debt.

Detailed explanation-2: -A sinking fund is simply defined as money set aside or budgeted for a future expense. Unlike a savings account or emergency fund, a sinking fund has a singular purpose.

Detailed explanation-3: -What Is a Sinking Fund? A sinking fund is a fund containing money set aside or saved to pay off a debt or bond. A company that issues debt will need to pay that debt off in the future, and the sinking fund helps to soften the hardship of a large outlay of revenue.

Detailed explanation-4: -A sinking fund is a means of repaying funds borrowed through a bond issue. The funds are repaid through periodic payments to a trustee who retires part of the issue by purchasing the bonds in the open market.

Detailed explanation-5: -A sinking fund is where you strategically set aside chunks of money each month to pay for any non-monthly planned expense that you have coming up in the future. Instead of feeling stressed and anxious about how you’ll pay for them, you set aside little bits of money now so you can pay them in full later on.