Rate covenant in economics and finance

Hello everyone! Welcome to today's lesson. Today, we are going to explore the concept of rate covenant in economics and finance. A rate covenant is a provision in a financial agreement that sets specific limitations or requirements on certain financial ratios or rates. These covenants are commonly found in loan agreements, bond indentures, and other financial contracts. They serve as a safeguard for lenders and investors, ensuring that the borrower or issuer maintains certain financial standards throughout the term of the agreement.