Marietta Hotels used a twenty-five-year, $50 million bond issue to finance its expansion. In its plan to ensure that funds would be available to redeem the bonds at maturity, it arranged that none of the bonds would mature during the first fifteen years. Therefore, 10 percent of the bonds mature each year until all the bonds are retired at the end of the twenty-fifth year. This is an example of the ____ method of repayment.

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13-11-2019
Business

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Marietta Hotels used a twenty-five-year, $50 million bond issue to finance its expansion. In its plan to ensure that funds would be available to redeem the bonds at maturity, it arranged that none of the bonds would mature during the first fifteen years. Therefore, 10 percent of the bonds mature each year until all the bonds are retired at the end of the twenty-fifth year. This is an example of the ____ method of repayment.

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Nyctalus Nyctalus · Answer 1 · 2019-11-13T06:27:07+01:00

Answer: sinking fund

Explanation: In simple words, it refers to the method under which then organisation set aside a fund for the repayment of this debt over the years.

Under this method, the organisation is setting aside 10 percent every year so that there will be no heavy load on the organisation at the end of the tenure.

Hence from the above we can conclude that the given case depicts sinking fund.