Which of the Following Statements Regarding Bond Covenants Is Most

question 79

Multiple Choice

Which of the following statements regarding bond covenants is most accurate?

• A)If the issuer fails to live up to any covenant,the issuer goes into bankruptcy.
• B)The stronger the covenants in the bond contract,the less likely the issuer will default on the bond,and so the higher the interest rate investors will require to buy the bond.
• C)Covenants are restrictive clauses in a bond contract that limit the issuer from taking actions that may undercut its ability to repay the bonds.
• D)Bond agreements seldom contain covenants that restrict the ability of management to pay dividends.
• E)Equity holders try to include as few covenants as possible in a bond agreement.

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Definitions:

Vertebrates

Animals with a backbone or spinal column, including mammals, birds, reptiles, amphibians, and fish.

Invertebrates

Organisms without a vertebral column, including animals like insects, mollusks, and crustaceans.

Complex Adaptations

Traits or features that have evolved through many incremental steps to solve specific problems and improve the survival and reproduction of an organism.

Fitness Advantages

Traits or behaviors that increase an individual's reproductive success and chances of survival in a particular environment.