© 2015 Shmoop University, Inc. All rights reserved.

Finance Glossary

Just call us Bond. Amortized bond.

Over 700 finance terms, Shmooped to perfection.

Sinking Fund


A company with bonds outstanding will buy a portion of the bonds each year by making periodic payments to a trustee who then buys a portion of the issue on the open market. Investors prefer sinking funds since they greatly reduce the risk of the issuer's defaulting on repaying the principal at maturity.