QUESTION 10 In general the yield of general obligation bonds

QUESTION 10 In general, the yield of general obligation bonds is higher than that of revenue bonds True False

Solution

False
Revenue bonds are those municipal bonds which are backed by a specific projects. On the other hand, a general obligation bond is backed by full faith and credit of the municipal government and therefore, it can use any source of funds to repay these bonds. Since, General obligation bonds are relatively safer and default free, it pays a lower interest than a revenue bond. In other words, the yield on general obligation bonds is lower than the yield of revenue bonds.