Clauses in the Indenture Agreement That Limit the Actions of a Bond

question 272

Multiple Choice

Clauses in the indenture agreement that limit the actions of a bond issuer as a safeguard for bondholders are referred to as _____ and include such features as _____.

• A) Deferred clauses; a conversion feature
• B) Deferred clauses; a restriction on issuing new debt
• C) Protective covenants; a call provision
• D) Protective covenants; a restriction on the sale of company assets
• E) Protective covenants; a floating interest rate

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Definitions:

Scenario Analysis

A process of analyzing possible future events by considering alternative possible outcomes (scenarios).

Sensitivity Analysis

A technique used to determine how different values of an independent variable affect a specific dependent variable under a given set of assumptions.

Cash Flow Forecasts

Predictions about future cash inflows and outflows of a business over a specific period.

Forecasting Risk

Forecasting risk involves the uncertainty in predicting future values of a variable or future occurrences of events, affecting planning and decision-making in businesses.