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1.
When you invest in a Ginnie Mae bond, you usually receive a monthly payment including _______.
Interest and principal. Ginnie Mae investors usually receive a monthly payment that includes both interest and a portion of the outstanding principal. Or they may receive monthly payments including only interest, and then receive the principal back when the mortgage matures.
2.
Homeowners are least likely to prepay their mortgages when they _______.
Take out a home equity loan. Homeowners may prepay their mortgages when they sell their homes, refinance themespecially if mortgage interests rates fallor when they simply decide to pay down the principal.
3.
Which of the following issue government agency bonds?
Government National Mortgage Association, Federal National Mortgage Association, World Bank agencies. The Government National Mortgage Association (GNMA) and the Federal National Mortgage Association (FNMA), along with other agencies including World Bank-related agencies and those that package student loans, all offer government agency bonds.
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.
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.
