What is a revenue bond?

A revenue bond is specifically secured by specific revenue sources generated from particular projects or services. This means that the financial security of the bond relies on the income earned from those designated sources rather than the general taxing power of the issuer.

For instance, revenue bonds are commonly used to finance projects like toll roads, bridges, or utilities, where the revenue generated from usage or service fees is designated to repay the bondholders. This creates a direct connection between the project's revenue stream and the bond repayment, providing clarity and focus for both investors and the issuing authority.

The other options do not accurately reflect the characteristics of revenue bonds. Bonds secured by the full faith and credit of the issuer imply a different type of financial backing, typically associated with general obligation bonds. Additionally, bonds without repayment obligations do not align with standard bond structures, which inherently involve an obligation to repay. Lastly, the notion that revenue bonds pertain exclusively to nonprofit organizations is inaccurate since they can be issued by governmental entities and various organizations, not limited to the nonprofit sector.