CFA Level I · CFA Level I Exam · Credit Analysis for Government Issuers
A municipality issues bonds that are supported only by the revenue from a toll bridge it owns, and the bondholders have no claim on the municipality's taxing power. These bonds are best described as:
The bonds are revenue bonds. Their repayment depends on cash flows from a specific project, here the toll bridge, and not on the municipality's general taxing power, which is what backs general obligation bonds. Sovereign bonds are issued by national governments.
- ARevenue bondsCorrect
- BSovereign bonds
- CGeneral obligation bonds
Explanation
Revenue bonds are serviced from the cash flows of a specific project, such as a toll bridge. General obligation bonds are backed by the issuer's general taxing authority. Sovereign bonds are issued by national governments, not municipalities.
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