General-obligation bond definitions
| Word backwards | noitagilbo-lareneg dnob |
|---|---|
| Part of speech | The part of speech of the word "general-obligation bond" is a noun. |
| Syllabic division | gen-er-al-ob-li-ga-tion bond |
| Plural | The plural form of the word "general-obligation bond" is general-obligation bonds. |
| Total letters | 21 |
| Vogais (4) | e,a,o,i |
| Consonants (7) | g,n,r,l,b,t,d |
General-Obligation Bond
A general-obligation bond, also known as a GO bond, is a type of municipal bond that is backed by the full faith and credit of the issuing government entity. This means that the bond is supported by the government's ability to raise taxes and use other revenue sources to repay bondholders.
Investors are attracted to general-obligation bonds because they are considered low-risk investments due to the backing of the government entity. These bonds are often used to finance projects such as schools, parks, roads, and other infrastructure improvements that benefit the community as a whole.
When a government issues a general-obligation bond, it is essentially promising to use its resources to repay bondholders, even if it means raising taxes or cutting spending in other areas. This commitment gives investors confidence in the bond's ability to generate a steady stream of income.
General-obligation bonds typically have lower interest rates than other types of bonds, such as revenue bonds, because of the perceived safety of the investment. Investors are willing to accept lower returns in exchange for a more secure investment vehicle.
Overall, general-obligation bonds play a crucial role in allowing government entities to finance projects that benefit their communities without having to raise taxes or cut services immediately. It is important for investors to carefully consider the risks and rewards associated with these bonds before making any investment decisions.
Key Takeaways:
- General-obligation bonds are backed by the full faith and credit of the issuing government entity.
- Investors are attracted to these bonds due to their low-risk nature.
- These bonds are used to finance projects that benefit the community.
- General-obligation bonds have lower interest rates compared to other types of bonds.
- Investors should weigh the risks and rewards before investing in these bonds.
General-obligation bond Examples
- The city council approved issuing general-obligation bonds to fund the construction of a new library.
- Investors were attracted to the general-obligation bond offering due to the city's strong credit rating.
- School districts often use general-obligation bonds to finance new school buildings and facilities.
- Voters will have the opportunity to vote on a proposed general-obligation bond to improve the local infrastructure.
- General-obligation bonds are backed by the full faith and credit of the issuing government entity.
- The county issued general-obligation bonds to raise funds for a public transportation project.
- General-obligation bonds typically have lower interest rates compared to revenue bonds.
- The state legislature authorized the issuance of general-obligation bonds for a new state park development.
- Bondholders of general-obligation bonds have a claim on the issuer's tax revenue for repayment.
- Municipalities may use general-obligation bonds to finance a variety of public projects, such as roads, bridges, and schools.