Products & Their RisksQuestion 27 of 398
Ginnie Mae (GNMA) mortgage-backed securities differ from most other agency securities because they are:
a.Exempt from all federal taxes
b.Backed only by the issuing corporation's credit
c.Backed by the full faith and credit of the U.S. government
d.Short-term discount instruments with no interest
Explanation
GNMA is a government-owned corporation, and its mortgage-backed securities carry the full faith and credit of the U.S. government, unlike Fannie Mae and Freddie Mac, which are government-sponsored but not directly guaranteed. GNMA interest is federally taxable, and the securities pay monthly interest and principal, not zero-coupon.
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