A legal agreement that helps protect a lender if a borrower does not make required payments on notes or bonds is called a(n):Multiple ChoiceEquity.Indenture.Mortgage.Lease.Sinking fund.
Question
A legal agreement that helps protect a lender if a borrower does not make required payments on notes or bonds is called a(n):Multiple ChoiceEquity.Indenture.Mortgage.Lease.Sinking fund.
Solution
The correct answer is Indenture. An indenture is a legal and binding agreement, contract, or document between two or more parties. In finance, it is a document that specifies the important features of a bond, such as its maturity date, timing of interest payments, method of interest calculation, callable/convertible features, if any, and covenants, if any. It serves as a protection for the lender if the borrower fails to make the required payments on notes or bonds.
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