Revenue bonds are backed by cash flows from a specific project.

Revenue bonds are backed by cash flows from a specific project.

• A. Revenue Bonds backed by cash flows from the project
• B. General Obligation
• C. Mortgage
• D. Debentures

Answer: (A)

Revenue bonds are funded by the revenues generated by a specific project rather than by the issuer’s tax power. The money from that project—such as tolls, service fees, or facility rents—is earmarked to pay debt service to bondholders. If the project performs well, payments stay current; if it underperforms, there’s a higher risk of default, and protections like rate covenants may try to safeguard payments. This distinguishes them from general obligation bonds, which are supported by the issuer’s taxing authority; mortgage bonds, which are secured by real estate collateral; and debentures, which are unsecured and rely on the issuer’s credit. So the statement matches the defining feature of revenue bonds.

Revenue bonds are funded by the revenues generated by a specific project rather than by the issuer’s tax power. The money from that project—such as tolls, service fees, or facility rents—is earmarked to pay debt service to bondholders. If the project performs well, payments stay current; if it underperforms, there’s a higher risk of default, and protections like rate covenants may try to safeguard payments. This distinguishes them from general obligation bonds, which are supported by the issuer’s taxing authority; mortgage bonds, which are secured by real estate collateral; and debentures, which are unsecured and rely on the issuer’s credit. So the statement matches the defining feature of revenue bonds.