PPT Slide

• Sinking funds are generally handled in one of two ways, at firm’s option.

  • Randomly call a specified number of bonds at par each year for sinking fund purposes.
  • Buy the required bonds on the open market.

• Call bonds if kd < coupon rate, but fill sinking fund requirement by buying bonds in the market if kd > coupon rate.

Previous slide

Next slide

Back to first slide

View graphic version