4. What is the distinction between general obligation debt and revenue bond debt? Why might a...
4. What is the distinction between general obligation debt and revenue bond debt? Why might a government issue revenue bond debt instead of general obligation debt?
Homework Answers
General obligation debt is backed by the government and there is no specific project identied which shall be a source for principal ad interest payments. Any source of revenue can be used to make payments.
Revenue bond debt is a debt which is backed by the project for which financing is being undertaken. Only the revenue from that project can be used to pay off the debt.
A goverment might issue revenue bond debt instead of general obligation debt as it is safe for the government and the liabiltity is limited to the project and does not extend to the issuer.
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4. What is the distinction between general obligation debt and
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