What does a bond indenture include?

A bond indenture serves as the formal agreement that outlines the terms and conditions of a bond issuance. It includes comprehensive legal language that governs the relationship between the bond issuer and the bondholders. Key components typically found in a bond indenture are covenants, which are promises made by the issuer regarding the conduct and limitation of its operations, including maintaining certain financial ratios and protecting the interests of bondholders.

Additionally, the bond indenture specifies the rights and responsibilities of both parties, details the interest payment schedule, and outlines provisions for what happens in the event of defaults or other financial difficulties. This legal framework is essential in ensuring that both the issuer and bondholders are protected and understand their obligations and rights, which is why this option is identified as correct.

Other aspects mentioned, such as forecasted cash flows, bond rating details, and government regulations, may play important roles in the broader context of bond issuance and market performance, but they are not contained within the bond indenture itself.