- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 42. Fixed-Income Securities: Defining Elements
- Subject 2. Bond Indenture
CFA Practice Question
The purpose of a bond's indenture is to ______.
A. set forth in great detail the promises of the issuer and the rights of the bondholders
B. appoint a trustee as a third party to the contract and ensure that the trustee acts in a fiduciary capacity for bondholders
C. ensure that certain activities are carried out by the borrower
Explanation: The bond indenture is the legal contract that describes the form of the bond, the issuer's obligations, and the investor's rights.
User Contributed Comments 3
| User | Comment |
|---|---|
| Peter | Is it really 'in great detail'? |
| SKIA | yes |
| Shaan23 | I didnt choose that answer because of the great detail fact. The Bond Prospectus goes into great deal and describer the covenants. Indenture only lists them. I chose C but I really didnt like that answer either but had to choose it. |