Which instrument is issued by states and municipalities to finance large public works projects?

Which instrument is issued by states and municipalities to finance large public works projects?

• A. Corporate Bonds
• B. General Obligation Bonds
• C. Municipal Notes
• D. Revenue Bonds

Answer: (B)

Public bodies finance large capital projects with bonds that are backed by the issuer’s full faith and credit. General obligation bonds are issued by states and municipalities for these projects and are secured by the issuer’s taxing power (often with voter approval). This means debt service comes from general tax revenues rather than a specific project’s earnings, making them the classic instrument for funding big public works. By contrast, revenue bonds rely on the project’s own revenues for repayment, municipal notes are short-term financing, and corporate bonds are issued by private companies, not governments.

Public bodies finance large capital projects with bonds that are backed by the issuer’s full faith and credit. General obligation bonds are issued by states and municipalities for these projects and are secured by the issuer’s taxing power (often with voter approval). This means debt service comes from general tax revenues rather than a specific project’s earnings, making them the classic instrument for funding big public works. By contrast, revenue bonds rely on the project’s own revenues for repayment, municipal notes are short-term financing, and corporate bonds are issued by private companies, not governments.