General obligation bonds are backed by
A)the full faith and credit of the purchaser.
B)The full faith and credit of issuing state; taxes that can be raised to pay the interest and principal.
C)households in high tax brackets.
D)All of the above

Question

Quizplus · Accepted Answer

General obligation bonds are backed by the full faith and credit of the issuing state, which means that the state pledges to use its taxing power to raise the necessary funds to pay the interest and principal on the bonds in the event that the revenue generated by the project funded by the bonds is insufficient. Therefore, choice B is correct. Choice A is incorrect because the bonds are backed by the issuing state and not the purchaser. Choice C is incorrect because the ability to pay taxes does not determine the backing of general obligation bonds.

General Obligation Bonds Are Backed by