Match each type of bond security with its primary backing or defining structural characteristic.
- General Obligation (GO) BondBacked by the full faith, credit, and taxing power of a municipal issuer.
- Revenue BondBacked by earnings from a specific project or facility, such as a toll road or airport.
- Corporate DebentureAn unsecured corporate obligation backed solely by the general creditworthiness of the issuer.
- Treasury Inflation-Protected Security (TIPS)A U.S. government debt security whose principal value adjusts periodically based on changes in the Consumer Price Index.
Answer
General Obligation bonds match with full faith and taxing power backing; Revenue bonds match with project revenue backing; Corporate Debentures match with unsecured corporate credit backing; TIPS match with CPI-adjusted principal backing.
Each debt instrument is correctly paired with its distinct backing structure: General Obligation bonds depend on municipal taxing authority, Revenue bonds rely on project revenues, Corporate debentures depend on unsecured corporate creditworthiness, and TIPS feature inflation-indexed principal adjustments.
Step-by-Step Solution
Key Concept
Classification and Backing of Government, Municipal, and Corporate Bonds