Question 1

What is the primary source of repayment for a General Obligation (GO) bond?

Accepted Answer

GO bonds are backed by the full faith, credit, and unlimited taxing power of the issuing municipality. They are repaid through property taxes and other general tax revenues.

Question 2

What type of municipal bond is repaid solely from the revenues generated by the facility it finances?

Accepted Answer

A revenue bond is repaid exclusively from the earnings of the specific project it funds, such as a toll road, airport, or utility system. Unlike GO bonds, they are not backed by taxing power.

Question 3

What is a double-barreled bond?

Accepted Answer

A double-barreled bond is a municipal bond backed by both the revenue from a specific project AND the taxing power of the issuing municipality, giving it two sources of repayment.

Question 4

What is a Tax Anticipation Note (TAN)?

Accepted Answer

A TAN is a short-term municipal debt instrument issued in anticipation of future tax revenues. It allows municipalities to meet current cash-flow needs before taxes are collected.

Question 5

What distinguishes a moral obligation bond from a standard GO bond?

Accepted Answer

A moral obligation bond is backed by a non-binding legislative pledge to repay the debt, but the legislature is NOT legally required to appropriate funds. It lacks the full legal backing of a GO bond.

Municipal Bonds – Series 7 Exam Prep

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