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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