Lenders protect themselves from conflicts of interest with shareholders through:
A)cooperative agreements signed by shareholders and lenders.
B)limiting the amount of funds bondholders lend.
C)loan agreements that prohibit companies from undertaking excessive risk.
D)offering lenders a share of profits.

Question

Quizplus · Accepted Answer

Loan agreements that prohibit companies from undertaking excessive risk protect lenders from conflicts of interest with shareholders. This ensures that the company does not undertake risky ventures that would increase the likelihood of default on loans, thereby protecting the lenders' investments. Cooperative agreements or offering lenders a share of profits may not necessarily protect lenders from conflicts of interest, and restricting the amount of funds that bondholders lend may not be sufficient to address conflicts of interest.

Lenders Protect Themselves from Conflicts of Interest with Shareholders Through