In financial markets, the bond indenture results in _________?
Correct answer: D. lower risk
- A. lower federal rate
- B. higher federal rate
- C. higher risk
- D. lower risk
Explanation
A bond indenture specifies protective covenants, repayment terms and restrictions on the issuer. These conditions protect bondholders and therefore reduce the perceived risk of the bond.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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