Why Do the Issuers of Bonds Seek to Increase the Strength

question 76

Multiple Choice

Why do the issuers of bonds seek to increase the strength and number of covenants in a bond agreement?

• A)Covenants favour 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.
• E)Covenants increase a firm's default risk.

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