Which of the following statements is true?
A)An example of a covenant is a restriction that limits those actions of the borrower that have an impact on the probability of repayment.
B)An example of a covenant is a restriction that encourages those actions of the borrower that have an impact on the probability of repayment.
C)A covenant is a restriction written into either bond or loan contracts.
D)All of the listed options are correct.

Question

Quizplus · Accepted Answer

Covenants are restrictions placed on borrowers by lenders, which can either limit actions that negatively impact the borrower's ability to repay the loan (as in A) or encourage actions that positively impact the borrower's ability to repay (as in B). They are indeed written into loan or bond contracts, making all the listed options correct.

Which of the Following Statements Is True