Test 11 – Duration Basics

Affirmative covenants primarily restrict managerial discretion, while negative covenants are largely administrative.

Negative covenants directly limit managerial discretion to protect bondholders, while affirmative covenants are largely administrative.

Both affirmative and negative covenants mainly describe how coupon payments are calculated.

Neither affirmative nor negative covenants is legally enforceable once the bond is issued.