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Question: 1 / 875

Which type of bond is secured by the full revenue base of the issuer?

Revenue bonds

General obligation bonds

The correct choice is general obligation bonds. These bonds are backed by the full taxing power and revenue-generating capabilities of the issuer, which can be a municipality or a government entity. This means that the issuer is obligated to use its entire revenue base, including taxes, to repay the bondholders.

General obligation bonds are considered more secure than other types of bonds because they are not solely dependent on specific project revenues. Instead, they draw from the overall financial strength of the issuing authority, which often enhances their creditworthiness and can lead to lower interest rates.

Revenue bonds, in contrast, are secured by the income generated from specific projects or revenue streams, such as tolls or fees, rather than the issuer's overall revenue. This makes them riskier for investors, as the repayment is contingent on the success of the project funded by the bonds.

Term bonds and serial bonds refer to the structure of repayment rather than the security of the bond itself. Term bonds are issued with a single maturity date, while serial bonds have multiple maturity dates, but neither indicates a backing by the issuer's full revenue base.

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Term bonds

Serial bonds

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