Revenue Bonds For Dummies

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Revenue bonds for dummies. Bonds are long term lending agreements between a borrower and a lender. Practice questions why should an investor not trade municipal go bonds short. The selling price. Unlike tax backed bonds revenue bonds are issued to fund municipal facilities that ll generate enough income to support the bonds.

2 read the official statement. Corporations generally issue bonds to raise money for capital expenditures operations and acquisitions. For example say you buy a bond with a face value of. Bonds are known as fixed income securities because you know the exact amount of cash you ll get back if you hold the security until maturity.

These bonds are used to fund specific infrastructure projects such as building a new toll highway. Both general obligation bonds and revenue bonds are. As long as a muni is rated high and is a general obligation muni not a revenue muni consider going without the insurance for the drop of extra juice. For example when a municipality such as a city county town or village needs to build new roads or a hospital it issues bonds to finance the project.

Third you also want to choose a municipal bond that carries a maturity you can live with. They are supported by the income created by those projects and for this reason are considered somewhat less safe than general obligation bonds. A bond is simply a loan taken out by a company. In other words the money raised by the bond offering directly finances the project and the project once complete generates the revenues to pay back the interest and principal on the bonds to investors.

General obligation bonds generally don t default. In exchange for the capital. Knowing the right questions to ask about a bond can save you money and you can. General obligation bonds are issued to raise funds right away to cover costs while revenue bonds are issued to finance infrastructure projects.

These bonds raise money for certain utilities toll roads airports hospitals student loans and so on. If you want to invest in bonds you need to know how to read the bond ratings that the big three rating companies use and how to figure whether a taxable or tax free municipal bond is the better investment. You will need to become familiar with revenue bonds for the series 7 exam. Municipalities may issue many types of municipal bonds but the two main types are go general obligation bonds and revenue bonds.

Revenue bonds are another type of muni bond that is backed by the revenue generated by a specific project being financed by the bond issue.