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Bonds 109: US Government Agency Bonds

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1.
Compared to Fannie Mae, Freddie Mac _______.
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Is growing faster. Freddie Mac is currently growing faster, partly due to its smaller market share.
2.
Freddie Mac bonds are perceived as safer than Ginnie Mae bonds.
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False. Ginnie Mae securities are perceived as safer from default than Freddie Macs.
3.
Which of the following issue government agency bonds?
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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 minimum initial investment in a Ginnie Mae bond is _______.
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$25,000. The minimum investment for a Ginnie Mae is generally $25,000, although you sometimes can buy them for less than $25,000 on the secondary market, as well as through shares in mutual funds or investment trusts that invest in Ginnie Maes.
5.
When many mortgages in an investment pool are prepaid, the investor may face the problem of _______.
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Reinvesting the money in another security that provides a lower interest rate. When a number of mortgages in the pool are prepaid, the investor receives payments of interest and principal sooner than planned. This can be a problem if the government agency bond matures at a time when interest rates on similar investments are low.