The bonds, which are backed by the full faith and credit of the issuing body is called:

Question

Options

• AGeneral obligation bonds
• Bloan-backed bonds
• Cstructured bonds
• Drevenue bonds

• A
  79% (27)
• B
  3% (1)
• C
  12% (4)
• D
  6% (2)

Explanation

General obligation (GO) bonds are backed by the full faith and credit of the issuing government body, meaning the issuer pledges its taxing power and all available resources to repay bondholders - making A the correct answer.

Why the distractors are wrong:

• B (loan-backed bonds) are secured by a pool of underlying loans (like mortgages), not a government's credit pledge.
• C (structured bonds) refers to complex debt instruments with customized risk/return profiles, unrelated to government backing.
• D (revenue bonds) are repaid only from the income generated by a specific project (e.g., a toll road or stadium), not from the issuer's general tax revenues or credit.

Memory tip: Think "GO" = "Government's Own promise" - the government puts its full creditworthiness on the line, as opposed to revenue bonds which are self-supporting from a single income source.

No community discussion yet for this question.