Two of the ways that debentures reduce the risk of default a. bond covenants and sinking...
Homework Answers
Answer : a) bond covenants and sinking funds
Bond covenants is also called as debt covenants. It is the restrictions imposed by the lenders on the borrowers, so that the interest of the lenders are protected.
Sinking fund means debtors must pay some of the value of the bond or debt after the specified period of time. This decreases the risk for the creditors.
Hence, bond covenants & sinking funds are the two ways to reduce debentures risk of default.
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Two
of the ways that debentures reduce the risk of default
a. bond covenants and sinking...
uestion 8 Which of the following is true concerning bond covenants? Bond covenants are legal restrictions...
uestion 8 Which of the following is true concerning bond covenants? Bond covenants are legal restrictions placed in order to minimize the risk of default on bonds. Bond covenants are restrictions placed on bondholders to protect rights of equity holders. Violation of a bond covenant requires that a company declares bankruptcy If a company violates a bond covenant, it means it has failed to make interest or principal repayments on debt in a timely manner
How is default risk different from default risk premium?Describe two ways an investor can evaluate a...
How is default risk different from default risk premium?Describe two ways an investor can evaluate a bond issuer's risk of default.
31) What is default risk? How is it different from default risk premium? Describe two ways...
31) What is default risk? How is it different from default risk premium? Describe two ways an investor can evaluate a bond issuer’s risk of default. （Please explain in details, the more the better）
A corporation wishes to raise capital by selling sinking fund debentures through the agency of a...
A corporation wishes to raise capital by selling sinking fund debentures through the agency of a syndicate of investment bankers who agree to market and underwrite the securities for a commission fee of 3 percent of the nominal capital. Debentures are bonds unsecured by any specific property. The investment banker guarantees to sell the entire issue at the stated price. The debentures mature and are due at face value after a stated number of years. The sinking fund refers to...
Based on your understanding of bond ratings and bond-rating criteria, which of the following statements is...
Based on your understanding of bond ratings and bond-rating criteria, which of the following statements is true? An indenture is a legal document that details the rights of bondholders. If the indenture includes a sinking funds provision, the bond will have more default risk. An indenture is a legal document that details the rights of bondholders. If the indenture includes a sinking funds provision, the bond will have less default risk.
Q1. A company generally has two ways to handle its sinking fund: It can either call...
Q1. A company generally has two ways to handle its sinking fund: It can either call its bond or purchase its bonds on the open market. If you are the financial manager of the company, how should you do? Q6: Compare the interest rate risk and reinvestment rate risk between a 10-year bond and a 1-year bond. We assume the two bonds have the same coupon rate at 10%.
D Question 14 5 pts Protective covenants in a bond indenture protect the investor from interest...
D Question 14 5 pts Protective covenants in a bond indenture protect the investor from interest rate risk. the company in case of default. O bond investors from adverse actions by the company. O bond investors whose bonds are called by the company.
Hialurily date. • A bond issuer is said to be in default if it does not...
Hialurily date. • A bond issuer is said to be in default if it does not pay the interest or the principal in accordance with the terms of the indenture! agreement or if it violates one or more of the issue's restrictive covenants. • A bond contract feature that requires the issuer to retire a specified portion of the bond issue each year is called a sinking fund provision • A bond's call provision gives the issuer the right to...
A bank is able to reduce the default risk of a line of credit by which...
A bank is able to reduce the default risk of a line of credit by which method? Da syndication b. clean up requirement cannual review of customer's credit status d. all of the above QUESTION 25 In deciding on short-term borrowing a firm should consider which important impact a reputational risk b human resources risk crefinancing risk none of the above
A bank is able to reduce the default risk of a line of credit by which...
A bank is able to reduce the default risk of a line of credit by which method? a. syndication b. clean up requirement c. annual review of customer's credit status d. all of the above The main benefits associated with a well-designed concentration system include: a. higher opportunity costs b. greater control over balances c. less float d. greater control over balances and improved investment returns.
uestion 8 Which of the following is true concerning bond covenants? Bond covenants are legal restrictions placed in order to minimize the risk of default on bonds. Bond covenants are restrictions placed on bondholders to protect rights of equity holders. Violation of a bond covenant requires that a company declares bankruptcy If a company violates a bond covenant, it means it has failed to make interest or principal repayments on debt in a timely manner
A corporation wishes to raise capital by selling sinking fund debentures through the agency of a syndicate of investment bankers who agree to market and underwrite the securities for a commission fee of 3 percent of the nominal capital. Debentures are bonds unsecured by any specific property. The investment banker guarantees to sell the entire issue at the stated price. The debentures mature and are due at face value after a stated number of years. The sinking fund refers to...
D Question 14 5 pts Protective covenants in a bond indenture protect the investor from interest rate risk. the company in case of default. O bond investors from adverse actions by the company. O bond investors whose bonds are called by the company.
Hialurily date. • A bond issuer is said to be in default if it does not pay the interest or the principal in accordance with the terms of the indenture! agreement or if it violates one or more of the issue's restrictive covenants. • A bond contract feature that requires the issuer to retire a specified portion of the bond issue each year is called a sinking fund provision • A bond's call provision gives the issuer the right to...
A bank is able to reduce the default risk of a line of credit by which method? Da syndication b. clean up requirement cannual review of customer's credit status d. all of the above QUESTION 25 In deciding on short-term borrowing a firm should consider which important impact a reputational risk b human resources risk crefinancing risk none of the above
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