Which type of municipal bond typically requires a feasibility study to assess the issuer's ability to pay interest?

The correct choice is revenue bond. This type of municipal bond is secured by the income generated from a specific project or source, such as tolls from a toll road or fees from a public utility service. Because the repayment of revenue bonds depends on the revenue generated by the project the bond finances, it is essential to conduct a feasibility study. This study assesses the likely success and profitability of the project, ensuring that enough revenue will be generated to cover interest payments and principal repayment.

The feasibility study evaluates various factors, including projected demand, potential risks, and the overall economic environment, which is critical for a revenue bond's issuance. The financial health of the project and the issuer must be strong enough to ensure investors that their returns are secure.

In contrast, general obligation bonds are backed by the full faith and credit of the issuing municipality, meaning their repayment is not tied to a specific revenue-generating project. Therefore, they do not typically require the same level of analysis regarding project feasibility. Similarly, while special tax bonds and project bonds may have specific attributes related to financing, they do not necessitate a feasibility study for assessing interest repayment in the same way revenue bonds do.