SIE practice questionmediumMortgage-Backed Securities
Which statement about GNMA securities is TRUE?
- AThey pay monthly principal and interest✓ Correct answer
- BInterest is paid semiannually
- CThey are taxable only at the state level
- DThey are not subject to prepayment risk
Explanation
Why A — They pay monthly principal and interest
GNMA pass-throughs pay monthly. Interest is fully taxable, and GNMAs are subject to prepayment risk.
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