What is a key factor regarding revenue bonds?

A key factor regarding revenue bonds is debt service coverage. Revenue bonds are typically repaid from the income generated by specific projects, such as toll roads, airports, or schools. Debt service coverage is crucial because it measures the ability of the project to generate sufficient revenue to cover its scheduled debt payments. A higher debt service coverage ratio indicates a greater ability to meet financial obligations, which is an essential factor for investors when assessing the risk associated with revenue bonds.

In general, the strength of the underlying project’s revenue stream directly impacts the bond's risk and attractiveness. The factors like interest rates, bond maturity, and market demand are important in evaluating bonds but do not specifically define the operational and financial health of the underlying revenue-generating projects that back revenue bonds. Therefore, the focus on debt service coverage is critical for understanding the viability and creditworthiness of revenue bonds.