Some bonds have an orderly, preplanned, alternative system of repayment called Sinking funds and serial bonds.
A sinking fund is a savings account established expressly to save funds for bond or debt repayment. When it comes time to pay off debts and bonds made in the past, a corporation may be faced with a significant outlay. In this instance, a sinking fund aids in reducing the impact of this high expense.
A sinking fund is a set-aside sum of money that a trustee uses to retire bonds by purchasing them from any bondholder who wishes to sell them on the open market. A serial bond, on the other hand, has a set schedule for when it will retire bonds. The outstanding bond balance will eventually decrease in both situations.
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