Bond Sinking Funds: How Staged Retirements Work
Summary
Hollow Point Trading shares an explainer on how a bond sinking fund retires an issue in stages. Using a hypothetical $10 million bond issue with $1 million retired each year, it shows how outstanding principal falls and why individual holders may not receive equal annual payments.
https://youtu.be/OwEvR9xetYs
A sinking fund retires an issue in stages #SinkingFund #Bonds #Fixe...
A bond sinking fund does not necessarily give every holder the same annual principal payment. Imagine a hypothetical ten million dollar issue whose terms require one million dollars of bonds to be retired each year. After one completed retirement, the issue has nine million dollars outstanding, assuming no other changes. That issue level reducti...
