FNMA Has Direct Holdings of 30-Year Fixed-Rate Mortgages Financed by Three-

question 11

Essay

FNMA has direct holdings of 30-year fixed-rate mortgages financed by three- to five-year agency securities sold to the public.
What kind of interest rate option could FNMA use to limit the interest rate risk? Explain how this would work. Explain how a collar could also be used.

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Definitions:

Oligopoly

A market structure characterized by a small number of firms controlling a large majority of the market share and often engaging in strategic interactions.

Rogers Wireless

A major Canadian telecommunications and media company known for providing wireless communications services.

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A Canadian telecommunications and wireless service provider that offers a range of mobile services, including voice, text, and data communications.

Telus Mobility

A Canadian wireless network operator and a division of Telus Communications offering mobile voice, text, and data services.