Purchase Fund

Purchase Fund

A feature of some bond indentures and preferred stock that requires the issuer to make an effort to purchase a specified amount of securities if they fall below a stipulated price (usually par value).

Notes:

A purchase fund is similar to a sinking-fund provision. It can be an advantage to investors if the fund is trading below par value, because the company must pay par to repurchase the bonds.

See also: Par Value, Preferred Stock, Sinking Fund

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Purchase fund

Resembles a sinking fund, except that money is used to purchase bonds only if they are selling below their par value.