Asked by Darren Szack on Apr 26, 2024
Verified
A local government in Montana issued bonds to the general public to build a community park in the locality.The primary objective of the proposed community park is to enhance the green cover in the locality.Which of the following best describes the bonds issued in this scenario?
A) General obligation bond
B) Secured bond
C) Revenue bond
D) Pass-through bond
General Obligation Bond
A municipal bond backed by the full faith and credit of the issuing authority, with repayment guaranteed by the authority's ability to tax.
Revenue Bond
A type of municipal bond supported by the revenue from a specific project, like a toll road or public utility, rather than from tax revenue.
Secured Bond
A type of bond backed by the issuer's assets, providing a safeguard to bondholders by promising specific collateral in case of default.
- Recognize the types and purposes of bonds issued by local governments and other entities.
Verified Answer
ZK
Zybrea KnightMay 02, 2024
Final Answer :
A
Explanation :
General obligation bonds are issued by municipalities and are backed by the credit and taxing power of the issuing jurisdiction rather than the revenue from a given project, such as a community park. This makes option A the correct choice, as the bonds are likely issued with the promise to use general tax revenues to repay the bondholders, rather than relying on revenue generated from the park itself.
Learning Objectives
- Recognize the types and purposes of bonds issued by local governments and other entities.