Revenue Bonds are secured by what source?

Revenue bonds are a type of debt security that are specifically backed by the revenue generated from a particular project or source, rather than from the issuer's general credit or taxing power. This means that the repayment of these bonds is secured by a dedicated stream of income, such as tolls from a toll road, fees from a public utility, or specific tax revenues earmarked for a particular purpose.

Choosing a specific source of revenues or a dedicated tax highlights the distinguishing feature of revenue bonds. Investors in these bonds look for the cash flow associated with the project or undertaking that is financing the bond, as that cash flow will be used to cover the bond's interest and principal repayments. This structure reduces the risk to investors because they can assess the reliability and stability of the revenue source being pledged.

In contrast, the other options, while they reflect various aspects of public finance, do not accurately define the basis for revenue bonds. A guarantee from the state government implies a level of backing that is not typical of revenue bonds, as they do not rely on general government funds. The full faith and credit of the entity pertains more to general obligation bonds, which are supported by tax revenues of the municipality. Future asset sales do not provide the same level of security, as they