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General obligation bonds may be backed by a variety of credits depending on the state and local law; those credits include taxes on local property , regressive taxes and/or all other sources of revenue to the municipality. As a general rule, revenue bonds are backed by the revenue generated by the municipal facility funded by the bond issue.
The basic types of municipal bonds are: General obligation bonds: Principal and interest are secured by the full faith and credit of the issuer and usually supported by either the issuer's unlimited or limited taxing power. These bonds are usually considered the most secure type of municipal bond, and therefore carry the lowest interest rate.
A limited-tax general obligation pledge requires a local government to levy a property tax sufficient to meet its debt service obligations but only up to a statutory limit. Generally, local governments already levy a property tax and can choose to use a portion of the property tax it already levies, use some other revenue stream, or increase ...
The post Municipal Bonds vs. Corporate Bonds appeared first on SmartReads by SmartAsset. Bonds often play an important role in a well-rounded investment portfolio. While both municipal and ...
A revenue bond is a special type of municipal bond distinguished by its guarantee of repayment solely from revenues generated by a specified revenue-generating entity associated with the purpose of the bonds. Revenue bonds are typically "non-recourse", meaning that in the event of default, the bond holder has no recourse to other governmental ...
Bonds are a contract between an investor and whoever is issuing the bond — be it a company or government — where the issuer agrees to pay the investor a specified amount over a set period of time.
Pros and cons of investment-grade bonds vs. high-yield. ... credit rating changes and economic downturns. Here’s a look at a few more pros and cons. ... for example, high-yield bonds could work ...
An attraction for municipalities is that the bonds allow them to avoid legislated debt restrictions that may be encountered when issuing general obligation bonds. [1] Toll revenue bonds are more speculative than "general obligation" bonds, which are backed (or guaranteed) by tax revenues of a state or local government.