Protection for debt holders takes the form of protective covenants in the bond indenture. These covenants place restrictions on which of the following activities?
A) The sale of assets
B) Payment of dividends
C) The issuance of additional debt
D) All other choices are typical protective covenants.

Question

Quizplus · Accepted Answer

Protective covenants can place restrictions on various activities to protect the interests of debt holders. Some of the typical activities that can be restricted include the sale of assets, payment of dividends, and issuance of additional debt. Other activities that can be restricted may include changes in management, mergers or acquisitions, and investments in new projects. Therefore, all other choices are potential protective covenants that can be included in a bond indenture.

Protection for Debt Holders Takes the Form of Protective Covenants