Question

Federally-sponsored agency debt

A. is legally insured by the U.S. Treasury.

B. would probably be backed by the U.S. Treasury in the event of a near-default.

C. has a small positive yield spread relative to U.S. Treasuries.

D. would probably be backed by the U.S. Treasury in the event of a near-default and has a small positive yield spread relative to U.S. Treasuries.

E. is legally insured by the U.S. Treasury and has a small positive yield spread relative to U.S. Treasuries. Federally sponsored agencies are not government owned. These agencies'debt is not insured by the U.S. Treasury, but probably would be backed by the Treasury in the event of an agency near-default. As a result, the issues are very safe and carry a yield only slightly higher than that of U.S. Treasuries.

Answer

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