Question

Please provide 2 to 3 paragraphs response to the following question. What is the difference between...

Please provide 2 to 3 paragraphs response to the following question.

What is the difference between general obligation bonds and revenue bonds? What are the advantages and disadvantages of each?

Homework Answers

Answer #1

In (GO) general obligation bond, bond repayments are guaranteed by total revenue generated by projects. Total revenue includes both operating revenue and tax revenue generated by projects.

While in revenue bonds, bond repayments are guaranteed by only operating revenue generated by projects.

Comparing both bonds, general obligatiob bonds are considered as safe because its potential cash source is greater than that of revenue bonds. Therefore, these are less likely to default compared to revenue bonds.

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