Question

Which one of the following statements regarding an original issue $25,000 GNMA bond is correct?

Multiple Choice

• The investor will receive $25,000 as a principal payment at maturity.

• The investor will receive fixed quarterly interest payments.

• The investor will receive the future value of $25,000 at maturity.

• The investor will receive payments totaling $25,000 over the life of the bond.

• The investor should receive more than $25,000 but the amount of each payment is unknown in advance.

Answer 1

The correct answer is Option E

Ginnie Mae or GNMA Bonds are the bonds that are mortgage backed and fully secured by the government. The payment of the mortgage changes according to the interest rate prevailing in the market. The Maturity of the Bond also varies according to the change in the principal payment. Therefore, The Payment is Unknown but the investor would receive more than the principal amount due to the interest also which are paid periodically.