Chapter 3- Government Issues Flashcards
what is the range in maturity length for treasury bills? Do treasury bills pay interest?
4 to 52 weeks, no
What’s the range of maturity for treasury notes?
1 to 10 years
What is the range of maturity for treasury bonds?
10 to 30 years
How are treasury notes and bonds priced?
As a percentage of par to 32nds of 1%
What is a Treasury STRIP ( what is the acronym for?)
Separated trading of registered interest and principal securities,
Basically it’s a zero-coupon bond backed by U.S. Government securities
What are treasury receipts? ( hint; they are similar to Strips)
Created by broker dealers and banks, they by U.S. Treasury Securities, place them in a trust, and sell off the interest and principal payment to different investors
How often is the principal on TIPs adjusted?
Semi-annually
GNMA (Ginnie Mae) buys pools of mortgages that have been insured by which two governmental agencies?
The Federal Housing Administration and the VA
Are Fannie Mae and Freddie Mac publically traded companies?
Yes
What is the Federal Farm Credit system?
A group of private lenders that provide different types of financing for farmers
What is a collaterized mortgage obligation and who issues them?
A CMO is a mortgage-backed Security collaterized by mortgages on single to four family homes,
Private Finance companies, as well as Freddie Mac and Fannie Mae issue them
What happens to CMO s it interest rates fall?
Homeowners will refinance more quickly and the holder of the CMO will be paid off more quickly than they hoped
How do falling interest rates effect the value of a principal-only CMO?.
The value increases, since falling rates causes prepayments to increase
How are interest-only CMOs effected by rising interest rates?
Their value increases because with higher interest rates there will be fewer prepayments, therefor increasing the number of interest payments the CMO holder will receive
