Inclusion of Restrictions in the Bond Contract Leads To

question 58

Multiple Choice

Inclusion of restrictions in the bond contract leads to:

• A) Higher agency costs
• B) Higher bankruptcy costs
• C) Higher interest costs
• D) None the above

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Definitions:

Payback Period

The duration it takes for an investment to return its initial cost to the investor, a measure of an investment's risk and liquidity.

Initial Cost

The total expense incurred to acquire an asset or start a project, including all relevant expenses.

Cash Inflows

Cash inflows represent the money received by a business from its operational, financial, and investment activities, contributing to its total cash pool.

Rate of Interest

The percent of principal charged by the lender for the use of its money or the rate earned on invested capital.