Which of the Following Is a Typical Bond Covenant Restriction

question 108

Multiple Choice

Which of the following is a typical bond covenant restriction on the issuance of new debt?

• A)New debt must have a lower coupon payment than existing debt.
• B)No new debt can be issued until existing debt has been paid.
• C)New debt cannot mature before existing debt.
• D)New debt must be offered at a discount.
• E)New debt must be subordinate to existing debt.

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Definitions:

Gain Or Loss

The difference between the selling price and the purchase price of an asset, resulting in a financial profit or loss.

Disposal Of Equipment

The process of selling, scrapping, or eliminating machinery or equipment that is no longer needed.

Book Value

The value of a company based on its financial statements, calculated by assets minus liabilities.