The Inclusion of Covenants in a Term Loan Is Designed

question 24

True/False

The inclusion of covenants in a term loan is designed to protect the borrower from taking on too much debt.

---

Definitions:

Default Risk

The risk that a borrower will not repay a loan according to the agreed terms, leading to potential losses for the lender.

Glass-Steagall Act

An act of Congress in 1933 that separated investment banking from retail banking to reduce financial speculative bubbles and prevent bank failures.

Commercial Banking

Banking services provided to businesses and individuals, including deposit taking, lending, and various other financial transactions.

Investment Banking

A sector of the banking industry that deals with the creation of capital for other companies, governments, and other entities.