Series 79 practice questioneasyDebt Offerings
What is the main purpose of an indenture in a bond offering?
- ATo set the legal terms of the notes, including covenants, events of default, and payment mechanics✓ Correct answer
- BTo register common stock with FINRA
- CTo disclose management’s stock option grants
- DTo establish a fairness opinion record
Explanation
Why A — To set the legal terms of the notes, including covenants, events of default, and payment mechanics
To set the legal terms of the notes, including covenants, events of default, and payment mechanics The indenture is the governing contract between the issuer and trustee for the benefit of noteholders. It defines the operating rules of the debt instrument after issuance.
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