Explore BrainMass

Explore BrainMass

    Different Types of Debt Obligations

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Analyse different types of debt. Address the following in your paper

    General Obligation bonds
    Revenue Bonds
    Certs of Obligation
    Commercial Paper
    Capital leases
    Notes payable

    © BrainMass Inc. brainmass.com March 4, 2021, 11:49 pm ad1c9bdddf

    Solution Preview


    There are different types of debt that often face an organization or local government and it is imperative that organizations how these different types of debts impact the organization. This paper analyses the different types of debts.

    General Obligation bonds :

    General obligation (GO) bonds are those debts issued by the local government to help raise funding for public spending and are often fully backed by the taxing power and the credit of the municipality that is issuing these debt instruments. In this sense the municipality commits the resources at its disposal to be able to pay the bondholders. Such debt instruments helps the local governments be able to fund projects that would not directly bring in revenues such as parks, roads and bridges among others. General Obligation bonds are low risk debt instruments and this is the reason that they are attractive to bondholder since they are often backed by the credit and full faith of the local governments issuing them and defaulting is very law as the local governments can use various resources to repay the bondholders (Bonds 200, 2012a).

    The key advantage of this type of debt is that they are low risk and rate highly among investors. This is because of the local government's power to tax and can therefore raise such taxes in order to be able to repay bondholders. Such bonds are also callable where the municipal can call the bonds earlier than their maturity period thereby being able to avoid any future adverse changes in interest rates that may impact the value of the bonds for the municipal government. This implies there is almost zero risk of defaulting in such a debt instrument increasing the ...

    Solution Summary

    The expert analyzes the different types of debt.