26-81 Why Are the Regular GNMA Pass-Throughs Not Very Attractive

question 2

Multiple Choice

26-81 Why are the regular GNMA pass-throughs not very attractive to insurance companies and pension funds seeking long-term duration assets to match their long-term duration liabilities?

• A)Because of their short expected duration.
• B)Because these bonds have the shortest average life with a maximum of prepayment protection.
• C)Because they are zero coupon bonds and hence carry maximum amount of risk.
• D)Because of their failures to offer prepayment protection.
• E)Bondholders receive the promised coupon and principal payments but are not entitled to accrued interest payments.

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Definitions:

Neurotransmitters

Chemicals in the brain that transmit signals from one neuron to another, influencing various functions and moods.

Chemicals

Substances with a distinct molecular composition that are produced by or used in a chemical process.

Myelin Sheath

A fatty layer that envelops axons of some neurons, enhancing the speed at which nerve impulses are conducted.

Neuron

A nerve cell that is the basic building block of the nervous system, responsible for receiving, processing, and transmitting information through chemical and electrical signals.