CFA Level I · CFA Level I Exam · Fixed-Income Issuance and Trading
A bond issued by a municipal water authority is serviced solely from fees collected from customers of the water system, not from the issuer's general taxing power. This bond is best described as a:
The bond is a revenue bond because repayment comes from the cash flows of a specific project, here customer water fees. General obligation bonds rely on the issuer's general taxing power, and sovereign bonds are issued by national governments, so neither fits this description.
- Ageneral obligation bond
- Brevenue bondCorrect
- Csovereign bond
Explanation
Revenue bonds are repaid from the cash flows of a specific project or facility, such as water fees. General obligation bonds are backed by the taxing authority of the issuing government. Sovereign bonds are issued by national governments.
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