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1.
One advantage of government agency bonds is _______.
Higher return potential than that of Treasury securities. Agency bonds generally offer higher returns than Treasury securities do, along with higher volatility as the market for these securities responds to changes in mortgage rates.
2.
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.
3.
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.
4.
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.
5.
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.
