Blanks to fill in, by order of sentences.

1- fixed/variable

2-fluctuates with/ remains fixed regardless of

3- increase/ decrease

4- decrease/ increase

5 at the bottom- higher/ lower.

Please answer all the questions.

2. Agency conflicts between shareholders and creditors Aa Aa While the agency conflicts between managers and shareholders tend to receive the most press, they are not the only type of agency conflict affecting the modem corporation. Another equally important type of agency conflict is sometimes observed between a firm's common shareholders and its creditors, or bondholders. As with conficts between managers and shareholders, the basis of conflicts between shareholders and bondholders is divergent concerns and motives. In general, bondholders purchase corporate securities that provide a whereas shareholders purchase shares that are likely to provide a retum that riskiness of the firm. retum the If managers undertake projects that decrease the riskiness of the firm and its cash flows, then the wealth of the firm's bondholders will be , while that of the firm's shareholders will be Agency conflicts between shareholders and creditors Bondholders often employ a variety of devices-including restrictive covenants in the company's band indenture agreements-to protect their interests and constrain the actions of shareholders and the firm's managers. which of the following are restrictive covenants often used to protect the firm's bond value and bondholder wealth? Check all that apply. Provisions that require firing the firm's CEO whenever the firm's bond price decreases by more than 15% Provisions that prohibit the borrower from increasing debt ratios above specified levels Provisions that prohibit reducing the firm's liquidity ratio below specfied levels Provisions that require issuing new debt securities whenever interest rates drop below 5% In addition, pobential bondholders may require a compensation for the risks that cannot be adequately protected against using the restrictive covenants. interest rate on the firm's soon-to-be-issued bond as