An investor in a GNMA mortgage-backed security may be able to earn a return higher than the rate on a comparable maturity Treasury without taking on much,if any,default risk.

Question

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GNMA mortgage-backed securities are backed by the full faith and credit of the US government, which makes them virtually risk-free. As a result, investors may be able to earn a higher return without taking on default risk compared to a comparable maturity Treasury security, which also has no default risk.

An Investor in a GNMA Mortgage-Backed Security May Be Able