Question

______place some restrictions on the firm In such a way as to improve the odds that...

______place some restrictions on the firm In such a way as to improve the odds that the bondholders will be repaid
a. bond ratings
b. bond covenants
c. bond rating agencies
d. bond exchanges

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Answer #1

The Answer is Option (b) Bond Covenants.

Bond Covenants place some restrictions on the firm In such a way as to improve the odds that the bondholders will be repaid.

Explanation :

A bond covenant is a legally binding term of agreement between a bond issuer and a bondholder. Bond covenants are designed to protect the interests of both parties. Negative or restrictive covenants forbid the issuer from undertaking certain activities; positive or affirmative covenants require the issuer to meet specific requirements.

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