SIE practice questionhardBond Ratings
A client wants to minimize default risk when investing in agency bonds. Which of the following agency securities is NOT backed by the full faith and credit of the U.S. government?
- AGinnie Mae (GNMA) securities
- BFannie Mae (FNMA) securities✓ Correct answer
- CTreasury bonds
- DTreasury STRIPS
Explanation
Why B — Fannie Mae (FNMA) securities
Only Ginnie Mae (GNMA) securities and Treasury securities (bonds, STRIPS) are backed by the full faith and credit of the U.S. government. Fannie Mae (FNMA) securities are government-sponsored but not backed by the full faith and credit, so they carry more credit risk.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 1,867+ SIE questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Related Debt Securities questions
- If a bond issuer defaults on payment and does not pay interest or principal when due, the investor suffers from which…
- If interest rates fall, which bondholder is most likely to have their bond called before maturity?
- A client holds a long-term bond. If interest rates rise, the price of the bond is likely to:
- Which risk is most significant for investors in mortgage-backed securities such as CMOs?