Question

Suppose a potential bondholder requires an indenture agreement to include a limit on dividend distributions by the bond's issuer and also a restriction on the sale of the issuer's assets. In this case, the bondholder is most likely concerned about:a.shareholders transferring firm assets to themselves.b.shareholders claiming all of the residual profits of the firm.c.increasing interest rates.d.shareholder claims being diluted.e.shareholders earning a higher return on their investment in the firm than the bondholders earn on their debt.

Answer 1

The answer is option A

In this case, the bondholder is most likely concerned about shareholders transferring firm assets to themselves

Step-by-step explanation:

An indenture agreement is the formal contract between a bond issuer and the bondholders. It sets forth the details of all the terms and conditions of the bonds, such as the exact day of their maturity, the timing of the interest payments and how they are calculated, and the details of any special features.

In the case above, the provisions of the indenture agreement is tailored to include a limit on dividend distributions by the bond's issuer and also a restriction on the sale of the issuer's assets.

When this is done, the bondholder will be primarily concerned with shareholders transferring firm assets to themselves.

Answer 2

Choice A. investors moving firm advantages for themselves.

Step-by-step explanation:

Bondholders confine the investors to move association's advantage for themselves as it hampers there premium. Bondholder's need the firm to have that adequate measure of advantages in the firm that they had at the hour of bond issue. Investors moving firm advantages for themselves can expand hazard for the bondholders.