All Courses > Bonds > 100
Bonds 109: US Government Agency Bonds

Test your knowledge

Choose wisely. There is only one correct answer to each question.

0%
Keep studying!
Review your answers below to learn more.
1.
One advantage of government agency bonds is _______.
Choose wisely. There is only one correct answer.
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.
Homeowners are least likely to prepay their mortgages when they _______.
Choose wisely. There is only one correct answer.
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.
The extension risk increases the amount of money the investor has to buy other securities at a time of high interest rates.
Choose wisely. There is only one correct answer.
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.
4.
When you invest in a Ginnie Mae bond, you usually receive a monthly payment including _______.
Choose wisely. There is only one correct answer.
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.
5.
Fannie Mae and Freddie Mac are former US government agencies that are now privately held companies.
Choose wisely. There is only one correct answer.
False. Fannie Mae and Freddie Mac are former US government agencies that are now publicly listed companies.