What is the role of a bond trustee?

The role of a bond trustee is primarily to represent bondholders and enforce the terms laid out in the trust indenture. The trust indenture is a legal contract between the bond issuer and the bondholders, detailing the rights of the investors and the obligations of the issuer. The bond trustee acts in the best interests of the bondholders, ensuring that the issuer complies with the covenants and conditions set forth in the indenture.

This includes overseeing the payment of interest and principal, managing the funds related to the bond issue, and taking action if the issuer defaults on its obligations. The trustee serves as a neutral party that helps to protect the investment interests of bondholders by monitoring the issuer's compliance and representing their interests in instances of financial distress or restructuring.

The other roles mentioned in the options do not align with the function of a bond trustee. For instance, managing the issuer's investments involves overseeing financial resources for the issuer's benefit rather than primarily for the bondholders. Providing legal counsel is not within the responsibilities of the bond trustee, as they do not function as legal advisors during the bond issuance process. Setting interest rates on bonds is the purview of the market and the issuer, rather than the trustee's responsibility.