Some bonds require the borrowing company to maintain certain financial standards as demonstrated by its financial statements.This feature is known as:
A)convertibility.
B)a loan covenant.
C)callability.
D)seniority.

Question

Quizplus · Accepted Answer

A loan covenant is a provision in a bond agreement that requires the borrower to meet certain financial benchmarks or ratios. This ensures that the borrower is able to make interest and principal payments on the bond, and thus reduces the risk of default for the bondholder.

Some Bonds Require the Borrowing Company to Maintain Certain Financial