Write a Short Note About Bond Covenants

question 13

Essay

Write a short note about bond covenants.
Virtually all debt contracts contain covenants to restrict equity holders who control the firm from putting the bondholders' funds at risk.In the absence of such covenants,the incentives of equity holders to expropriate bondholder wealth would be reflected in the bond's coupon or price,resulting in higher borrowing rates.

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