Covenants in a Bond Contract Restrict the Actions That Management

question 23

True/False

Covenants in a bond contract restrict the actions that management of a firm can take that would benefit the debtholders of a firm at the expense of the equity holders of the firm.

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Definitions:

Compounded Semi-annually

Interest calculation method where interest is added to the principal twice a year, increasing the amount on which future interest is calculated.

Bequest

A transfer of personal property or assets to a beneficiary as dictated by the will of the deceased.

Perpetual Fund

A type of investment fund that has no fixed maturity date, often aiming to provide investors with a steady income indefinitely.

Indexed Annuity

An annuity that earns interest or provides benefits that are linked to the performance of a specified index of the stock market.