Bond indentures include restrictive covenants.These provisions protect the bondholders against ________.

Question

Quizplus · Accepted Answer

Restrictive covenants protect bondholders against an increase in borrower's risk, such as default or bankruptcy. They may limit the borrower's ability to engage in actions that could jeopardize their ability to repay the bond, such as taking on additional debt or selling off valuable assets. These covenants do not directly address inflation, liquidity risk, or maturity risk.

Bond Indentures Include Restrictive Covenants