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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.
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False. A municipality's full faith and credit includes taxation and borrowing, but not project revenue like user fees.
2.
The principal difference between general obligation bonds and revenue bonds is that _______.
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The two are backed by different kinds of collateral. General obligation bonds are backed by full faith and credit, and revenue bonds are backed by project revenue.
3.
Most general obligation bonds are purchased directly from municipalities.
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False. Most general obligation bonds are purchased on the secondary market.
4.
The tax status of general obligation municipal bonds makes them an undesirable investment for individuals in the higher tax brackets.
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False. The tax-free status of general obligation municipal bond interest makes these bonds desirable for those in the higher tax brackets.
5.
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.