provide a: FIXED or VARIABLE

return that: FLUCTUATES WITH or REMAINS FIXED REGARDLESS OF

bondholders will be: DECREASED or INCREASED

shareholder will be: DECREASED or INCREASED

may require a: LOWER or HIGHER

2. Agency conflicts between shareholders and creditors While the agency conflicts between managers and shareholders tend to receive the most prese, they are not the only type of agency conflict affecting the modem corporation. Another equally important type of agency conflict is sometimes observed between a firm's common shareholders and its creditors, or bondholders. As with conflicts between managers and shareholders, the basis of conflicts between shareholders and bondholders is divergent concerns and motives. In general, bondholders purchase corporate securities that provide a return, whereas shareholders purchase shares that are likely to provide a return that the riskiness of the firm. If managers undertake projects that decrease the riskiness of the firm and its cash flows, then the wealth of the firm's bondholders will be , while that of the firm's shareholders will be Agency conflicts between shareholders and creditors Hondholders often employ a variety of device-including restrictive covenants in the company's bond Indenture agreements--to protect their interests and constrain the actions of shareholders and the firm's managers Which of the following are restrictive covenants often used to protect the Firm's bond value and bondholder wealth Ock all that apply Provisions that require firing the firm's Cro whenever the new bord price decreases by more than 15 Provisions that prohibit the borrower from increasing debt ratios above specified levels Provisions that disallow the repurchase of stock or paying dividend unless profits and retained namnings are above specified amounts Provisions that require issuing new debt securities whenever interest rates drop below 5% In addition, potential bondholders may require Interest rate on the issoon-to-be-sued bond as compensation for the risks that Carnot be adequately protected against using the restrictive covenants