What defines a revenue bond?

A revenue bond is specifically designed to be repaid from the income generated by a particular project or source of revenue, rather than from the general credit or taxing power of the issuer. This means that the funds necessary to service the bond's interest and principal repayments come directly from the revenues produced by the project for which the bond was issued, such as tolls from a highway, fees from a utility service, or revenues from a public facility like a stadium.

Revenue bonds are often used in public finance to fund specific infrastructure projects that are expected to generate income over time, enabling the issuer to raise necessary capital without relying on general taxation or broad financial backing. This makes them attractive in situations where the project has a predictable revenue stream that can fund the bond payments.

Other options identify characteristics of different types of bonds. A bond backed by the issuer's credit refers to general obligation bonds, which rely on the issuer's overall financial strength. A bond without interest payments suggests a zero-coupon bond, which is not applicable in this context. A bearer bond, while a form of security that does not have to be registered to a specific owner and is paid to the holder, does not inherently define a revenue bond either.