Financing Covenants

Multiple Choice

Financing covenants:

A) are beneficial in preventing a manager from leaving bondholders penniless by liquidating the firm and paying out the proceeds to themselves and shareholders.
B) prevent the firm from promiscuously issuing new debt,which would dilute the claims of existing bondholders to the firm?s assets.
C) are beneficial to bondholders as they require that a certain portion of the bonds be retired before maturity.
D) give the bondholder the option to convert the bond into another security,typically the ordinary equity of the firm issuing the convertible bond.