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:

Therapeutic Response

The reaction or outcome following treatment or therapy, indicating the effectiveness of the intervention.

Sins

Actions or behaviors considered to be morally wrong or against religious or moral laws.

Listening

The active process of receiving and responding to spoken (and sometimes unspoken) messages.

Restating

The act of repeating or paraphrasing what someone else has said to ensure understanding or to provide clarity.