A sinking fund can be set up in one of two ways:
What are the advantages and disadvantages of each procedure from the viewpoint of the firm and the bondholders?
To identify: The advantages and disadvantages of given procedures from the firm’s point of view and the bondholders.
Introduction:
Sinking Fund: Sinking fund refers to the investment made by the issuer of the debt instrument annually, which is used to redeem bonds at maturity.
First way:
Second way:
Hence, both the ways have some advantages and disadvantages for firm and bondholders.
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