Bond Basics

Question 1

What is a General Obligation (GO) bond? How is the debt repaid?

Answer 1

1. A bond backed by credit and taxing power of the issuing jurisdiction rather than the revenue from a given project.
2. Debt repaid through taxation or revenue from projects. No assets are used as collateral.

Question 2

What is a Revenue Bond? What are types of Revenue Bonds? What are revenue generating examples?

Answer 2

1. A Bond supported by revenue from a specific project.
2. Airport Revenue Bonds, Toll Revenue Bonds, Utility Revenue Bonds.
3. Examples of revenue generators are toll bridges, highways, local stadiums.

Question 3

What are GO bonds used for?

Answer 3

To raise funds for projects that create streams of income for roads, parks, equipment, bridges. Short answer - to fund government projects that will benefit the community.

Question 4

What risks are commonly associated with Bonds?

Answer 4

1. Interest Rate Risk
2. Credit Risk