Consider the following statements about Sinking Fund : 1. It is a method of repayment of public debt. 2. It is created by the government out of budgetary revenues every year. Which of the statements given above is/are correct ?

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Submitted by examrobotsa on

Q: 93 (CDS-II/2011)
Consider the following statements about Sinking Fund :
1. It is a method of repayment of public debt.
2. It is created by the government out of budgetary revenues every year.
Which of the statements given above is/are correct ?

question_subject: 

Economics

question_exam: 

CDS-II

stats: 

0,68,80,43,25,68,12

keywords: 

{'sinking fund': [0, 0, 0, 1], 'budgetary revenues': [0, 0, 0, 1], 'repayment': [0, 0, 0, 5], 'public debt': [0, 0, 0, 6]}

The correct answer is option 3, which states that both statement 1 and statement 2 are correct.

Statement 1 is true because a sinking fund is indeed a method used for the repayment of public debt. A sinking fund is a pool of money set aside by the government or a corporation that is used to redeem or retire debt obligations when they become due. It is a way to ensure that funds are available to pay off debt at the designated time, reducing the risk of default.

Statement 2 is also correct. A sinking fund is created by the government or organization out of budgetary revenues every year. This means that a portion of the annual budget is allocated towards setting aside funds for the sinking fund. These funds are then accumulated over time until they are sufficient to meet the debt repayment obligations.

Therefore, as both statements 1 and 2 are accurate, the correct answer is option 3.