Assume that one year ago you purchased corporate bonds that have no protective covenants. Today, it is announced that the firm that issued the bonds plans a leveraged buyout. The market value of your bonds will likely ____ as a result.

Question

Quizplus · Accepted Answer

The market value of bonds without protective covenants is likely to decline in the event of a leveraged buyout because the buyout often increases the firm's debt burden, raising the risk of default for existing bondholders.

Assume That One Year Ago You Purchased Corporate Bonds That