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.
The minimum initial investment in a Ginnie Mae bond is _______.
Choose wisely. There is only one correct answer.
$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.
2.
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.
3.
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.
4.
Ginnie Mae, Fannie Mae, and Freddie Mac all combine mortgages into pools and then issue units in these pools to investors as bonds.
Choose wisely. There is only one correct answer.
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.
5.
Congress created Fannie Mae during _______.
Choose wisely. There is only one correct answer.
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.