Which one of the following statements correctly describes the unique feature of GNMA pass-through securities?
A) The interest income on a GNMA is exempt from state and federal tax.
B) GNMAs consistently have lives of 25-30 years.
C) GNMAs are backed by the full faith and credit of the issuing state.
D) GNMAs pay income to holders on a monthly basis.

Question

Quizplus · Accepted Answer

GNMA (Government National Mortgage Association) pass-through securities are unique in that they pay income to holders on a monthly basis, which includes both interest and a portion of the principal. This feature provides a steady income stream to investors, distinguishing it from many other types of securities that might pay interest semi-annually or annually.

Which One of the Following Statements Correctly Describes the Unique