Series 7 practice questioneasyDebt Securities — Agency Bonds — FNMA
The Federal National Mortgage Association (Fannie Mae) primarily:
- AInsures bank deposits up to $250,000
- BPurchases and securitizes residential mortgages to provide liquidity to the mortgage market✓ Correct answer
- CSets the federal funds rate
- DIssues Treasury securities on behalf of the government
Explanation
Why B — Purchases and securitizes residential mortgages to provide liquidity to the mortgage market
Fannie Mae (FNMA) is a government-sponsored enterprise that purchases residential mortgages from lenders, packages them into mortgage-backed securities, and sells them to investors. This process provides liquidity to lenders, enabling them to make additional loans. Fannie Mae securities carry an implied, but not explicit, government guarantee, making them slightly riskier than GNMA securities.
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