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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RELATED FAQS
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    Learn about the difference between the par value and market value of financial securities, including the role they play in ... Read Answer >>
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    People often get confused when they read about the "par value" for a stock. One reason for this is that the term has slightly ... Read Answer >>
  3. What is the difference between par and no par value stock?

    Understand the difference between par and no par value stock and how this differentiation affects corporate liabilities and ... Read Answer >>
  4. What does tier 1 capital tell investors about a bank's operations?

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  5. Are corporations required to state the par value of their stock?

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