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Bonds 109: US Government Agency Bonds

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1.
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.
2.
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.
3.
Congress created Fannie Mae during _______.
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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.
4.
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.
5.
Of the several risks that US government agency bond investors must consider, perhaps the least likely is ______.
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Risk of default. Government agency bonds are implicitly backed by the faith and credit of the US government.