Answer:
Require the issuer to set aside assets at specified amounts to retire the bonds at maturity.
Explanation:
Sinking fund is defined as amounts of money that are set aside to pay off a bond or debt. When a company incurs a debt it will take a large allocation of revenue to offset it. So they start setting aside sinking funds to cushion the hardship of repayment.
This is a way to avoid lump sum payment at bond maturity.
Sinking funds gives some level of security and reduces default risk, so interest rate is usually lower. Cash flow and profitability is increased
