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Basic Question 1 of 5
Any bond issued by an agency of the U.S. Government ______.
II. becomes a direct obligation of the U.S. Treasury in case of default
III. is secured by assets held by the agency
I. is exempt from the federal income tax on interest
II. becomes a direct obligation of the U.S. Treasury in case of default
III. is secured by assets held by the agency
User Contributed Comments 11
| User | Comment |
|---|---|
| katybo | II? |
| 01121975 | becomes an obligation of the US Government, not of Treasury |
| Rotigga | "Most federal agency securities are not obligations of the US Treasury." I don't agree with 01121975. |
| cp24 | Isn't the treasury part of the US govt? |
| thekapila | Its not directly a part of us govt. Treasury controls monetory policies .US govt controls fiscal only. |
| Khadria | What does III mean? Assets which are the property of the agency? OR, Assets which are held for the mortgage loans? |
| steved333 | It refers to assets that belong to the agency. If you're talking about mortgage loans, the assets are the real estate belonging to the purchaser of the property. But none of the US securities, whether they come from the Treasury or an agency, they are not collateralized by agency assets. There is no default risk, but if they DID default, it's not like you can go and take their office furniture... |
| cfatime21 | Actually the Fed controls monetary policy, the Treasury physically prints currency, while the US government controls fiscal policy. |
| stevo | why is III not correct? |
| Fabulous1 | I would also say three is correct. Not secured by specific assets but by the agency's assets as a whole |
| khalifa92 | I. not all quesi-government bonds are exempted from taxes. II. it doesn't become a direct obligation to the US Treasury but investors perceive implicit guarantee. III. is wrong because it implied that quesi-government bonds are backed by collateral which not the case always. |
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Learning Outcome Statements
describe funding choices by sovereign and non-sovereign governments, quasi-government entities, and supranational agencies
CFA® 2024 Level I Curriculum, Volume 4, Module 5.