Bond:
A bond can be defined as fixed income investment in which an investor gives money to a firm or business (private or governmental) in the form of loan that borrows the money for a particular stated period of time at a fixed or a variable rate of interest. They are used by firms, state, and sovereign governments for the purpose of raising funds and financing different projects and processes. The owners of bonds are called as debt holders or creditors of the issuer of the bonds.
Covenant:
Covenants are limiting clauses in a bond contract which are limit the issuer by taking actions that may undercut its capability to refund the amount of bonds.
To determine:
What happens when an issuer fails to live up to a bond covenant.
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