$3.$ Consider a bank lending to a firm. What Moral Hazard issues may arise? Obviously the firm could go bankrupt, but how could the acquisition of a loan make that more likely? What decisions may change because of the structure $($equity vs$.$ debt$)$ of the firm? What could be done to prevent such issues?

Search for Bond $($or loan$)$ Covenants, describe a few of them and how they would help alleviate Moral Hazard with debt $($bond or loan$)$ funding.