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1 FINANCE MCQS

In financial markets, a bond indenture results in ____________?

  • Lower federal rate
  • Higher federal rate
  • Higher risk
  • Lower risk
Correct Answer: D. Lower risk

Detailed Explanation

A bond indenture is a legal contract between the bond issuer and bondholders that specifies the terms, conditions, and protective covenants of the bond. These covenants reduce uncertainty and protect investor interests, which ultimately lowers the risk for bondholders.

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