Asked by Abigail Dupont on Apr 24, 2024
Verified
The contractual document containing restrictive covenants that limit the borrower's activities while a bond is outstanding is called:
A) a debenture.
B) an indenture.
C) a sinking fund.
D) Both a and b
E) All of the above
Restrictive Covenants
Clauses in contracts that impose limitations or conditions on the actions of parties, commonly found in lending agreements to protect the lender.
Indenture
A formal legal agreement, contract, or document, especially one relating to a loan or bond issue.
Debenture
An unsecured bond.
- Acknowledge the part that bond indentures play and their relevance in the bond market.
Verified Answer
SS
Shubham Singh6 days ago
Final Answer :
B
Explanation :
An indenture is a contractual document that outlines the terms of a bond issue, including the restrictive covenants that limit the borrower's activities while a bond is outstanding. A debenture is simply a type of bond that is not secured by specific assets, and a sinking fund is a reserve account set up to ensure that a bond issuer has enough funds to repay the bondholders at maturity. Therefore, choices A, C, D, and E are incorrect.
Learning Objectives
- Acknowledge the part that bond indentures play and their relevance in the bond market.