Purchase Fund

DEFINITION of '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).

BREAKING DOWN 'Purchase Fund'

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.

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