What defines a double barrel bond?

What defines a double barrel bond?

• A. A bond with a fixed interest rate
• B. A general obligation bond with a secondary revenue source
• C. A bond only backed by state funds
• D. A revenue bond without tax exemptions

Answer: (B)

A double barrel bond is specifically defined as a general obligation bond that has a secondary revenue source to back its repayment. This means that the bond benefits from two different sources of funds: one is the taxing authority of the issuer, which is the general obligation part, and the other is a dedicated revenue source that provides additional security for bondholders. This structure provides a higher level of safety for investors, as it reduces the risk of default by having multiple avenues for repayment. Bonds backed solely by state funds or those with fixed interest rates do not offer the dual security that a double barrel bond does. Similarly, revenue bonds typically rely on specific income-generating projects rather than a general obligation backing, and a double barrel bond involves both elements, which enhances investor confidence in the bond's reliability.

A double barrel bond is specifically defined as a general obligation bond that has a secondary revenue source to back its repayment. This means that the bond benefits from two different sources of funds: one is the taxing authority of the issuer, which is the general obligation part, and the other is a dedicated revenue source that provides additional security for bondholders. This structure provides a higher level of safety for investors, as it reduces the risk of default by having multiple avenues for repayment.

Bonds backed solely by state funds or those with fixed interest rates do not offer the dual security that a double barrel bond does. Similarly, revenue bonds typically rely on specific income-generating projects rather than a general obligation backing, and a double barrel bond involves both elements, which enhances investor confidence in the bond's reliability.