SIE Understanding Products and Their Risks Question 45: Answer and Explanation

Question: 45

Which of the following would generally be considered most likely to fulfill its debt service?

• A. Special Tax Bond
• B. Double-Barreled Bond
• C. Moral Obligation Bond
• D. Private Activity Bond

Correct Answer: B

Explanation:

B: Choice B is correct because a double-barreled bond receives revenue from a project, as a revenue bond does, but is also backed by the full faith and credit of the issuing authority, as GO bonds are. Choice A is incorrect because a special tax bond is backed by specific taxes, does not have income from a revenue stream, and is not backed by the full faith and credit of the issuing authority. Choice C is incorrect because a moral obligation bond is a kind of revenue bond, which is not backed by the full faith and credit of the issuing authority. Choice D is incorrect because a private activity bond is a type of revenue bond, which is not backed by the full faith and credit of the issuing authority.