PRC-2 · Chapter 5 · Question 28 of 50
What is the proper financial definition of a 'sinking fund'?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) An account where a constant amount is systematically saved and invested to meet a specific future obligation.
Explanation
A sinking fund is mathematically defined as a type of annuity where regular periodic deposits are made into an interest-bearing account specifically to accumulate a targeted lump sum needed in the future.
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