#1
What is a money market mutual fund (MMMF)?
A fund that invests in money market instruments
ExplanationInvests in short-term, low-risk financial instruments like Treasury bills and commercial paper.
#2
Which of the following is a characteristic of money market mutual funds?
High liquidity
ExplanationOffers quick and easy access to cash with minimal risk of loss.
#3
What is the primary advantage of investing in money market mutual funds?
Low risk
ExplanationOffers a conservative investment option with lower risk compared to many other securities.
#4
What is the typical minimum investment requirement for money market mutual funds?
$1,000
ExplanationMany funds require a minimum investment of $1,000 to get started.
#5
Which of the following is NOT a factor to consider when choosing a money market mutual fund?
Stock market performance
ExplanationIrrelevant to money market funds, which focus on short-term securities.
#6
What is the regulatory framework for money market mutual funds?
Regulated by the Securities and Exchange Commission (SEC)
ExplanationOversight by the SEC to ensure compliance with regulations and protect investors.
#7
Which of the following is NOT a type of money market instrument?
Corporate bonds
ExplanationUnlike Treasury bills and commercial paper, corporate bonds are not short-term and low-risk.
#8
What is the net asset value (NAV) of a money market mutual fund?
The value of one share in the fund
ExplanationRepresents the per-share market value of the fund's assets.
#9
Which of the following statements about money market mutual funds is true?
They are considered low-risk investments
ExplanationDue to their investments in stable, short-term securities, they are generally low-risk.
#10
Which of the following is NOT a risk associated with money market mutual funds?
Inflation risk
ExplanationTypically less affected by inflation compared to other investments.
#11
What is the purpose of regulation for money market mutual funds?
To maintain stability and protect investors
ExplanationEnsures the financial system stability and safeguards the interests of investors.
#12
What role do money market mutual funds play in the economy?
They facilitate short-term borrowing for governments and corporations
ExplanationProvide a source of short-term funding for various entities, aiding in financial operations.
#13
Which of the following factors can affect the returns of a money market mutual fund?
Changes in interest rates
ExplanationFluctuations in interest rates impact the fund's earnings and returns.
#14
What is the difference between a money market mutual fund and a money market account?
Money market accounts are insured by the FDIC, while money market mutual funds are not
ExplanationAccounts are FDIC-insured, providing a level of protection not available to mutual funds.
#15
What is the difference between a money market mutual fund and a bond mutual fund?
Money market funds invest in short-term debt securities, while bond funds invest in long-term debt securities
ExplanationDiffer in the duration of securities held – short-term for money market, long-term for bonds.