Asked by Santiago Quirós on Jul 08, 2024
Verified
__________ included in the bond indenture to protect bondholders from certain actions by the company.
A) Indentures are.
B) Debentures are.
C) Covenants are.
D) Articles of incorporation are.
E) A description of dedicated capital is.
Indenture
A formal legal agreement between a bond issuer and the bondholders, detailing the terms of the bond.
Covenants
Agreements or promises in a financial contract that certain activities will or will not be undertaken.
Dedicated Capital
Funds allocated specifically for a particular investment or project within a company.
- Comprehend the characteristics and clauses of bond indenture contracts.
Verified Answer
OA
Oluwafemi AyodeleJul 09, 2024
Final Answer :
C
Explanation :
Covenants are specific agreements included in the bond indenture that impose certain restrictions or obligations on the issuing company, with the aim of protecting the interests of the bondholders. These can include restrictions on the company's ability to incur additional debt, requirements for maintaining certain financial ratios, or constraints on paying dividends.
Learning Objectives
- Comprehend the characteristics and clauses of bond indenture contracts.
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