If the Firm Issues Debt but Writes Protective and Restrictive

question 36

Multiple Choice

If the firm issues debt but writes protective and restrictive covenants into the loan contract, then the debt may be issued at a _____ interest rate compared with otherwise similar debt.

• A) significantly higher
• B) slightly higher
• C) equal
• D) lower

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Definitions:

Agent

An individual authorized to act on behalf of another, often in business or legal matters.

Manifestations

Observable expressions or indications of a condition, disease, or the existence of a particular fact.

Reliance

Trust or dependence on something or someone, often used in legal contexts to refer to actions taken based on promises or agreements.

Respondeat Superior

A legal doctrine that holds an employer or principal legally responsible for the wrongful acts of an employee or agent, if such acts occur within the scope of the employment or agency.