Exploring Cumulative Sinking Funds: A Mathematical Perspective on Capital Repayment and Redemption

Merry Mariam Mathews

Abstract: The article delves into the concept of cumulative sinking funds, providing a mathematical insight that is accessible to non - math major students. It explains the fundamentals of sinking funds, cumulative sinking funds, capital repayments, and redemption prices while highlighting their interrelationships. Furthermore, it explores the benefits of cumulative sinking fundsand offers practical examples. By reinvesting interest, companies can harness compound interest to their advantage. The article also discusses the relationship between capital repayments and the loan term when redemption price remains constant. Drawing from various sources, this article simplifies the concept with clear explanations and illustrative examples.

Keywords: Sinking funds, cumulative sinking funds, capital repayment, redemption price, compound interest