Asked by Madison Jones on Jun 24, 2024
Verified
You would typically find all but which one of the following in a bond contract?
A) a dividend restriction clause
B) a sinking fund clause
C) a requirement to subordinate any new debt issued
D) a price-earnings ratio
Bond Contract
A legal document that outlines the terms of a bond issuance, including the interest rate, maturity date, and issuer's obligations.
Dividend Restriction Clause
A provision in a contract that limits or restricts the ability of a company to pay dividends to its shareholders.
Sinking Fund Clause
A provision in a bond contract that requires the issuer to periodically set aside funds to retire a portion of the debt before it matures.
- Gain insight into the working processes and intentions of distinct bond provisions.
Verified Answer
CS
Cameron ShorteJun 27, 2024
Final Answer :
D
Explanation :
A price-earnings ratio is typically not found in a bond contract. Bond contracts usually include clauses related to interest payments, maturity dates, redemption provisions, covenants, and default clauses. A dividend restriction clause may limit the issuer's ability to pay dividends to shareholders, while a sinking fund clause requires the issuer to set aside funds to repay the bondholders at maturity. A requirement to subordinate any new debt issued means that the issuer must repay the bondholders before taking any additional debt.
Learning Objectives
- Gain insight into the working processes and intentions of distinct bond provisions.