| An agency conflict can occur between stockholders (through managers) and creditors because the borrower may make decisions after the loan is made that affect the lender\'s welfare, e.g., take on additional debt or invest in risky projects. Creditors can protect themselves by: |
|
|
| Charging a higher than normal interest rate |
| Placing restrictive covenants in debt agreements |
| Requiring that the loan be secured. |
| An agency conflict can occur between stockholders (through managers) and creditors because the borrower may make decisions after the loan is made that affect the lender\'s welfare, e.g., take on additional debt or invest in risky projects. Creditors can protect themselves by: |
|
|
Creditors can charge higher interest, secure loan, or even plance restrictive covenants.
Thus, All of the above option is correct
Homework Sourse
