Although restrictive covenants can potentially reduce moral hazard, a problem with restrictive

covenants is that

borrowers may find loopholes that make the covenants ineffective.

All of these.

borrowers may find loopholes that make the covenants ineffective

they are costly to monitor and enforce

too many resources may be devoted to monitoring and enforcing them, as debtholders duplicate others'

monitoring and enforcement efforts.

only

borrowers may find loopholes that make the covenants ineffective

they are costly to monitor and enforce.

they are costly to monitor and enforce.

too many resources may be devoted to monitoring and enforcing them, as debtholders duplicate others'

monitoring and enforcement efforts.