US Government and Agency Securities

T-Bond

- % of par in 32nds - callable

T-Note

- % of par in 32nds - not callable

T-Bill

- annualized % discount from par - not callable

Federal Farm Credit System

- backed by issuing agency - loans to farmers - finance land purchases - finance farm equipment purchases - establishes buying co-ops to achieve economies of scale when purchasing agricultural goods

Federal National Mortgage Association (FNMA) and Federal Home Loan Mortgage Corporation

- backed by the issuing agencies - lines of credit with the US Treasury - Mortgage - backed paper associated with prepayment risk

Government National Mortgage Association (GNMA)

- only agency securities backed by the full faith and credit of the US government - approves lenders who issue pass-through certificates created from a pool of FHA- and VA- insured mortgages - monthly check to investor includes both principal and interest

Treasury Receipts

- type of zero-coupon bond - issued and backed by broker dealers - mature at par

Which of the following statements regarding T-bills are true? 1. T- Bills trade at a discount to par 2. T-Bills mature in less than 1 year 3. Most T-Bill issues are callable 4. T-Bills are a direct obligation of the US government

1, 2, 4

You buy ten 8% T-notes at 101.16. What is the dollar amount of this purchase?

10,150.00

Which of the following statements regarding US government agency obligations are true? 1. They are all direct obligations of the US government 2. They generally have higher yields than yields of treasury securities 3. The FNMA is a publicly traded corporation 4. Securities issued by GNMA trade on the NYSE floor

2, 3

Treasury STRIPS

Separate Trading of Registered Interest and Principal of Securities - zero-coupon bond - issued by US Treasury - mature at par

A customer wished to buy a security providing periodic interest payments, safety of principal, and protection from purchasing power risk. The customer should purchase

TIPS TIPS offer inflation protection and safety of principal because they are backed by the US government

TIPS

Treasury Inflation Protection Securities helps protect against purchasing power risk