Final answer:
A bond is a financial agreement for borrowing funds with an obligation to pay back with interest. Revenue bonds are backed by specific revenues, whereas general obligation bonds are backed by taxing power. Bond issuance involves a principal amount, an interest rate, and a maturity date, with credit ratings affecting investment appeal.
Step-by-step explanation:
A bond is a financial contract where the borrower agrees to repay the borrowed amount plus interest over a future period.
Revenue bonds are backed by specific revenue sources, such as the income generated by a toll bridge. In contrast, general obligation bonds are backed by the taxing power of the issuer, often taxes ad valorem, which are based on the assessed value of property.
Components of bond issuance typically include the principal amount (the initial amount borrowed), the interest rate, and the maturity date (when the principal and interest are due to be fully repaid).
Investment in bonds can be influenced by an entity's credit rating, which is assessed by credit rating agencies.
This rating impacts the perceived risk and the interest rate offered to investors.