What defines a revenue bond?

A revenue bond is specifically defined as a bond that is secured by the revenues from a particular project or source, rather than being backed by the general credit of the government. This means that the repayment of the bond is tied directly to the income generated by that specific project, such as tolls from a toll road or fees from a utility service.

This characteristic makes revenue bonds particularly attractive for funding projects that are expected to generate reliable income streams. Unlike general obligation bonds, which are financed through taxing power, revenue bonds depend on the performance of the project they finance.

The choice that mentions a bond backed by the government's credit refers to general obligation bonds, while the options regarding specific uses for educational purposes or tax exemptions do not accurately encapsulate the fundamental nature of revenue bonds in relation to their financing mechanisms. Thus, the definition that highlights the bond's reliance on a specific source of financing is the most accurate and represents the core concept of revenue bonds effectively.