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1.
US government agency bonds historically have provided somewhat higher earnings than Treasury securities.
True. Over time, Ginnie Maes, Fannie Maes, and Freddie Macs have had somewhat higher yields than Treasury securities.
2.
The extension risk increases the amount of money the investor has to buy other securities at a time of high interest rates.
False. The extension risk reduces the amount of money the investor has to buy other securities at a time of high interest rates, as the investor's bond pays more slowly when payment of the home mortgages in the pool is extended longer than planned.
3.
Congress created Fannie Mae during _______.
The Great Depression. Congress created the Federal National Mortgage Association in 1938 to make more dollars available for home loans to middle- and low-income citizens.
4.
Ginnie Mae, Fannie Mae, and Freddie Mac all combine mortgages into pools and then issue units in these pools to investors as bonds.
True. Ginnie Mae, Fannie Mae, and Freddie Mac all buy mortgages from financial institutions that made the loans and group them into pools. They then sell units in these pools to investors by issuing bonds through various financial institutions.
5.
One way you can purchase your first Ginnie Mae bond for less than $25,000 is _______.
On the secondary market. You sometimes can buy Ginnie Maes that are selling for less than $25,000 on the secondary market if their interest rates are low compared to more recent issues or if their principals have been substantially reduced.
