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Foundations Of Financial Management
Found in: Page 524
Foundations Of Financial Management

Foundations Of Financial Management

Book edition 16th
Author(s) Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen
Pages 768 pages
ISBN 9781259277160

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Short Answer

What is the purpose of serial repayments and sinking funds? (LO16-1)

The purpose of serial payments is to make payments in installments, whereas sinking funds keep aside the funds to retire the debts.

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Step by Step Solution

Retirement of bonds

Retirement of bonds refers to the stage where the corporations repay their bondholders when they reach maturity date.

Purpose of serial repayments and sinking funds

The primary purpose of serial repayments is to make payments in installments to the bondholders over the life of the issue.

In contrast, the debts are retired under sinking funds through semiannual or annual contributions made by the corporations into a fund formed explicitly for debt retirement.

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