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Bonds 109: US Government Agency Bonds

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1.
Ginnie Mae, Fannie Mae, and Freddie Mac all combine mortgages into pools and then issue units in these pools to investors as bonds.
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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.
2.
The extension risk increases the amount of money the investor has to buy other securities at a time of high interest rates.
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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.
When you invest in a Ginnie Mae bond, you usually receive a monthly payment including _______.
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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.
4.
Fannie Mae and Freddie Mac are former US government agencies that are now privately held companies.
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False. Fannie Mae and Freddie Mac are former US government agencies that are now publicly listed companies.
5.
US government agency bonds historically have provided somewhat higher earnings than Treasury securities.
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True. Over time, Ginnie Maes, Fannie Maes, and Freddie Macs have had somewhat higher yields than Treasury securities.