Which statement about revenue bonds is TRUE?

The statement that interest on revenue bonds is usually paid from the earnings of the facility for which the bond was issued is accurate. Revenue bonds are designed to finance specific projects, such as infrastructure, and the interest payments to bondholders are derived from the revenue generated by those projects. This means that if the project is successful and generates sufficient revenue, the bondholders will receive their payments from this income stream.

This characteristic distinguishes revenue bonds from general obligation bonds, which are funded by general tax revenues and can provide a guarantee of payment from the taxing authority's full credit. Revenue bonds rely on the performance and success of the specific facility, making them inherently more risky, but potentially offering higher returns if the projects are successful. Understanding this aspect is critical for assessing the risk and return associated with investing in revenue bonds versus other types of bonds.