Long-term bonds usually provide for repayment of principal before maturity. This is accomplished by a sinking fund.
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Long-term bonds usually provide for repayment of principal before maturity. This is accomplished by a sinking fund. With a sinking fund, the company retires a certain number of bonds each year.
A sinking fund protects bondholders because it reduces the average maturity of the bond, and its payment signals the fi nancial condition of the company.
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