What best defines "revenue bonds"?

What best defines "revenue bonds"?

• A. Bonds backed by the government's credit
• B. Bonds supported by specific project-generated revenue
• C. Bonds that are tax-exempt in all cases
• D. Bonds issued solely for educational purposes

Answer: (B)

Revenue bonds are best defined as bonds supported by specific project-generated revenue, making this choice the most accurate. These bonds are issued to finance public projects such as toll roads, bridges, hospitals, and other infrastructure, and they are repaid from the revenue generated by these projects rather than from a government’s general tax revenue. This means that investors receive interest payments from the income produced by the funded project, rather than relying on government credit or general tax revenues. The other options do not accurately describe revenue bonds. Bonds backed by the government’s credit typically refer to general obligation bonds, which are tied to taxpayer revenues. Tax-exempt status varies and is not universally applicable to all revenue bonds; some may be subject to taxes depending on specific legislative provisions. Moreover, issuing bonds solely for educational purposes does not capture the broader range of projects that revenue bonds can finance, as they can fund a variety of public infrastructure initiatives beyond educational uses. This distinguishes them as a unique financial tool within public financing.

Revenue bonds are best defined as bonds supported by specific project-generated revenue, making this choice the most accurate. These bonds are issued to finance public projects such as toll roads, bridges, hospitals, and other infrastructure, and they are repaid from the revenue generated by these projects rather than from a government’s general tax revenue. This means that investors receive interest payments from the income produced by the funded project, rather than relying on government credit or general tax revenues.

The other options do not accurately describe revenue bonds. Bonds backed by the government’s credit typically refer to general obligation bonds, which are tied to taxpayer revenues. Tax-exempt status varies and is not universally applicable to all revenue bonds; some may be subject to taxes depending on specific legislative provisions. Moreover, issuing bonds solely for educational purposes does not capture the broader range of projects that revenue bonds can finance, as they can fund a variety of public infrastructure initiatives beyond educational uses. This distinguishes them as a unique financial tool within public financing.