Protective covenants prevent bond issuers from irresponsible over-borrowing behavior and are offered for the benefit of:
A) common shareholders.
B) preferred shareholders.
C) Bondholders.
D) both common and preferred shareholders.

Question

Quizplus · Accepted Answer

Protective covenants are put in place to protect the interests of bondholders by limiting the actions of issuers that could negatively affect bondholders. Common and preferred shareholders do not benefit directly from these covenants.

Protective Covenants Prevent Bond Issuers from Irresponsible Over-Borrowing Behavior and Are