A bond that is repaid from the income generated by the project it finances is called what?

A bond that is repaid from the income generated by the project it finances is called what?

• A. Revenue Bond
• B. General Obligation Bond
• C. Treasury Bond
• D. Municipal Bond

Answer: (A)

Repayment from the income generated by the project it finances describes a revenue bond. In this setup, the bond funds a specific project, and the debt service—interest and principal—is paid from the project’s revenues (like tolls, user fees, or energy charges) rather than from the issuer’s general tax receipts. This makes the bond’s risk and security tied directly to the project’s ability to generate income. General obligation bonds, by contrast, are backed by the issuer’s taxing power and overall credit, not a specific project’s revenues. Treasury bonds are issued by the federal government, not a municipal entity. Municipal bonds is a broad category that includes both revenue and general obligation bonds, so the term alone doesn’t specify how the debt will be repaid.

Repayment from the income generated by the project it finances describes a revenue bond. In this setup, the bond funds a specific project, and the debt service—interest and principal—is paid from the project’s revenues (like tolls, user fees, or energy charges) rather than from the issuer’s general tax receipts. This makes the bond’s risk and security tied directly to the project’s ability to generate income.

General obligation bonds, by contrast, are backed by the issuer’s taxing power and overall credit, not a specific project’s revenues. Treasury bonds are issued by the federal government, not a municipal entity. Municipal bonds is a broad category that includes both revenue and general obligation bonds, so the term alone doesn’t specify how the debt will be repaid.