An analyst reviews a corporate bond indenture that contains these two covenants:1) The
An analyst reviews a corporate bond indenture that contains these two covenants:
1) The borrower will pay interest semi-annually
and principal at maturity.
2) The borrower will not incur additional debt if its debt/capital ratio is more than 50%.
What types of covenants are these?
A. Both are affirmative covenants.
B. Covenant 1 is negative and Covenant 2 is affirmative.
C. Covenant 2 is negative and Covenant 1 is affirmative.