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Bonds 208: General Obligation Bonds

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1.
A municipality's full faith and credit includes municipal taxes, bond issues, and user fees.
Choose wisely. There is only one correct answer.
False. A municipality's full faith and credit includes taxation and borrowing, but not project revenue like user fees.
2.
All of the following are examples of taxes that municipalities may use to pay general obligation bondholders, except _______.
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User fees. User fees are not an example of the kind of taxes municipalities use to pay bondholders.
3.
All of the following might be funded with general obligation bonds except _______.
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A pay parking ramp. This would generate revenue from user fees and would more likely be funded with revenue bonds than GO bonds.
4.
All of the following are ways to make a $1,000 investment in general obligation bonds except _______.
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Brokers. Brokers typically require minimums of greater than $5,000 to purchase general obligation bonds. The other options are general obligation bond pools that provide a much lower buy-in price.
5.
General obligation bonds are typically considered a safe investment because ________.
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Municipalities can raise taxes to avoid default. This typically gives them high credit ratings.