Reading 60: Features of Debt Securities - LOS a～ Q1-4 maintain, positive, following, describe, interest

yangh

 

LOS a: Explain the purposes of a bond's indenture, and describe affirmative and negative covenants.

Q1. Which of the following is an example of a positive covenant? The company:

A)   must maintain a times interest earned ratio of at least two times.

B)   must not use the same collateral to back more than one debt obligation.

C)   may not sell fixed assets that have been pledged as collateral for the bonds.

 

Q2. Which of the following is NOT a negative bond covenant?

A)   Credit rating must be investment grade.

B)   Restriction on asset sales.

C)   Current ratio of at least 2.25.

 

Q3. Which of the following contains the overall rights of the bondholders?

A)   Covenant.

B)   Indenture.

C)   Rights offering.

 

Q4. Which of the following bond covenants is considered negative?

A)   Payment of taxes.

B)   Maintenance of collateral.

C)   No additional debt.

 

davidleee

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yi913

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maggie78

A

maggie78

c

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