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Bonds 208: General Obligation Bonds

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1.
Most general obligation bonds are purchased directly from municipalities.
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False. Most general obligation bonds are purchased on the secondary market.
2.
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.
3.
Which of the following is an example of an ad valorem tax?
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Property tax. This is an example of an ad valorem tax, a tax levy based on the value of property or real estate.
4.
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.
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.