CFA Level I · CFA Level I Exam · Fixed-Income Markets for Government Issuers
Compared with a general obligation bond of a local government, a revenue bond issued to finance a stadium is most likely to:
Its credit risk is tied to the cash flows of the financed project, not the issuer's general taxing power. Repayment depends on the stadium's revenue viability, which is why analysts assess the project itself, unlike for general obligation bonds backed by taxes.
- Acarry lower credit risk because it has a dedicated revenue source
- Bhave credit risk tied to the project's cash flows rather than the issuer's taxing powerCorrect
- Cbe guaranteed by the central government's tax receipts
Explanation
Revenue bonds depend on the project's cash flows, so their credit quality depends on project viability, usually making them riskier than general obligation bonds. A dedicated source does not automatically lower risk, and central government tax receipts do not back them.
Did you get it right without looking?
One question tells you little. A timed set on Fixed-Income Markets for Government Issuers shows your real accuracy, how long you take and where you lose marks.
More Fixed-Income Markets for Government Issuers questions
- A government auctions USD 1,000 million of 5-year notes. Competitive bids at or below the stop-out yield total USD 1,400 million, and noncom…
- A government auctions EUR 1,000 million of 2-year zero-coupon bills with a face value of EUR 100 each using a single-price format. Bids, in …
- Which factor is most likely to lead a credit rating agency to assign a sovereign a higher rating on its local-currency debt than on its fore…
- In a government bond auction, the single-price format, in which all successful bidders pay the same price, is most likely to:
- Which of the following issuers is most likely a supranational agency?
- Supranational bonds are most likely to have strong credit quality because: