Final answer:
A general obligation bond may be backed by fines, sales taxes, real estate taxes, and the full faith and credit of the municipality, which relies on these sources to fund local budgets and repay bondholders. Hence, all the options are correct.
Step-by-step explanation:
A general obligation bond is a common type of bond that municipalities issue to raise funds for various projects. These bonds are most commonly backed by the following sources:
- Fines, which are monetary penalties imposed for violations of laws and regulations.
- Sales Taxes, which are taxes imposed on the sale of goods and services.
- Real Estate Taxes, which are taxes based on the value of real estate property.
- The full faith and credit of the municipality, which is the municipality's promise to use all available resources, including taxation and borrowing, to repay the bondholders.
Both property taxes and sales taxes are significant sources of revenue for municipalities and play a crucial role in backing general obligation bonds. These taxes ensure that the local government has a steady stream of income to meet its financial obligations, including the repayment of bonds. Property taxes, in particular, are a mainstay of local government finance and typically cover a large portion of the budgetary requirements for municipalities.