Bond covenants place some restrictions on the firm in such a way as to improve the odds that the bondholders will be repaid.

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Bond covenants are designed to protect the interests of bondholders by placing restrictions on the actions of the issuing firm. These restrictions help to ensure that the firm remains financially sound and has the ability to pay back its bondholders as promised. Examples of bond covenants may include limits on dividend payments or capital expenditures, requirements to maintain certain financial ratios, and restrictions on the issuance of additional debt.

Bond Covenants Place Some Restrictions on the Firm in Such