FBLA New Securities and Investments Exam 2026 – 400 Free Practice Questions to Pass the Exam

General Obligation Bonds are types of municipal bonds that are backed by the full faith and credit of the issuer, typically a state or local government. These bonds do not have a guaranteed income stream in the same way that revenue bonds do. Instead, they are funded through the taxing power of the government entity that issues them.

The key characteristic of General Obligation Bonds is that they are secured by the issuing entity’s ability to collect taxes. This allows them to meet their debt obligations to bondholders. Since the income for paying back these bonds comes from general tax revenues, the reliance on taxes is a fundamental feature of General Obligation Bonds.

This distinction is crucial in understanding the nature of the bond's payments and obligations. Revenue bonds, on the other hand, are funded by specific revenue sources, such as user fees from public utilities, thus offering more direct income streams. Tax-Free Bonds generally refer to the tax-exempt status of the interest earned rather than the source of repayment, and collateralized bonds are backed by specific assets or collateral, providing additional security.