Why Do the Issuers of Bonds Not Seek to Minimize

question 17

Multiple Choice

Why do the issuers of bonds not seek to minimize the strength and number of covenants in a bond agreement?

• A)Covenants favor the equity holders that managers work for.
• B)Covenants can increase the flexibility of the company issuing the bond.
• C)Covenants lower the interest rate investors will require to buy the bond.
• D)Covenants force the company to renegotiate the terms of the bond if they are broken.

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Definitions:

Globalization

The increasing interconnectivity and interdependence of cultures, economies, and technologies across the globe, leading to greater cultural exchange and economic integration.

Culturally

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