CFA Level I · CFA Level I Exam · Credit Analysis for Government Issuers
Compared with a general obligation bond, a municipal revenue bond issued for a hospital is most likely to have which feature?
Repayment of a hospital revenue bond depends on the hospital's operating cash flows. It is not backed by general property taxes, and it usually carries protective covenants such as rate covenants and limits on additional debt.
- ARepayment depends on the hospital's operating cash flowsCorrect
- BDebt service is guaranteed by general property taxes
- CBondholders have no covenants to protect them
Explanation
Revenue bonds rely on cash flows of the financed project and typically include covenants such as rate covenants and additional-bonds tests. General taxes do not back them, so the second and third options are wrong.
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