Which of the Following Would Be Considered a "Negative" Loan

question 22

Multiple Choice

Which of the following would be considered a "negative" loan covenant?

• A) The firm's current ratio cannot fall below 2.0
• B) All property must be maintained in good condition
• C) The firm's net worth must exceed $10,000,000
• D) The firm must carry property insurance on all collateral.
• E) Cash dividends cannot exceed 50% of earnings.

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Definitions:

Risk-Free Rate

The return on an investment with zero risk, typically associated with government bonds.

Market Risk Premium

The Market Risk Premium is the additional return an investor expects from holding a risky market portfolio instead of risk-free assets.

Beta

Beta measures the volatility of an investment relative to the market as a whole, indicating how much an investment's price is likely to move in relation to market changes.

Risk-Free Rate

The Risk-Free Rate is the theoretical rate of return on an investment with zero risk, typically represented by the yield on government securities like U.S. Treasury bills.