Series 7 Exam Question 295: Answer and Explanation

Question: 295

Which of the following statements is TRUE about revenue bonds?

• A. Their value is measured by the municipal project's capacity for generating revenue.
• B. They are secured by a mortgage-backed bond.
• C. They are a type of general obligation bond.
• D. They are subject to the statutory debt limitations of the issuing jurisdiction.

Correct Answer: A

Explanation:

A. The Series 7 examiners want to see that you can distinguish revenue bonds from general obligation bonds. In this question, Choice (A) is the correct answer. Revenue bonds are backed by a project's earning capacity. Choices (B), (C), and (D) are incorrect because revenue bonds are not secured by a specific pledge of property, are not a type of general obligation bond, and are not subject to debt limitations the way that many general obligation bonds are.