2. Violating a loan covenants can cause a firm to be in default on a loan, even if it has been able to make the required principal and interest payments to service the loan. True False 3. Which of the following does not describe the liquidation rights that typically are associated with preferred equity securities? They entitle the holder of the preferred equity to be paid before more junior shareholders. They typically require the repayment of the initial investment plus any accrued interest that remains unpaid. They offer downside protection to the equity investor. They are surrendered if the security is converted to common equity. They prevent dilution from occurring if later rounds of investment occur at lower prices