A major source of risk faced by GNMA issues is
A) Default risk.
B) Prepayment risk.
C) Counterparty risk.
D) a and b.
E) a, b and c.

Question

Quizplus · Accepted Answer

GNMA (Ginnie Mae) securities are backed by the full faith and credit of the U.S. government, minimizing default risk. However, they are subject to prepayment risk, where borrowers may pay off their mortgages early, affecting the cash flow to investors.

A Major Source of Risk Faced by GNMA Issues Is