Bond covenants are the best way for bondholders to protect themselves against dubious management actions.

Question

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Bond covenants are contractual agreements between bond issuers and bondholders that outline specific terms and conditions related to the bond issuance. These covenants help protect bondholders by establishing limitations and restrictions on the actions of the bond issuer, such as restricting the amount of debt that can be issued or requiring certain financial ratios to be maintained. This helps prevent dubious management actions that could negatively impact the bondholders' investments.

Bond Covenants Are the Best Way for Bondholders to Protect