Question

An investor wishes to buy a new issue of U.S. Government agency bonds. You recommend that the customer purchase Federal Home Loan Bank bonds with a 20 year maturity. The new issue of Federal Home Loan Bank Bonds will be sold:

Answer 1

Answer: a par

Explanation:

From the question, we are informed that an investor wishes to buy a new issue of U.S. Government agency bonds and was recommend that the customer purchase Federal Home Loan Bank bonds with a 20 year maturity.

It should be noted that new issues that relate to agency securities are typically sold by a selling group which will be appointed by the agency and such groups are usually made up of broker dealers and large banks.

The group will then sell the issue to the public at par and out of the revenue that is made, a selling concession will be paid by the agency to the selling group.