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.
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.
2.
When many mortgages in an investment pool are prepaid, the investor may face the problem of _______.
Choose wisely. There is only one correct answer.
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.
3.
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.
4.
Of the several risks that US government agency bond investors must consider, perhaps the least likely is ______.
Choose wisely. There is only one correct answer.
Risk of default. Government agency bonds are implicitly backed by the faith and credit of the US government.
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.