ECONOMICS
MONEY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The risk of the money market mutual fund is less than the certificate of deposit
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the risk of the money market mutual fund is slightly greater than the certificate of deposit
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The risk of both is about the same
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not enough information given
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Detailed explanation-1: -How does the risk involved in a money market mutual fund compare with the risk of a certificate of deposit (CD)? The risk of the money market mutual fund is slightly greater than that of the CD.
Detailed explanation-2: -How does the risk of a money market mutual fund compare with that of a savings account? A money market mutual fund has slightly greater risk than a savings account.
Detailed explanation-3: -Mutual funds are less risky than individual stocks due to the funds’ diversification. Diversifying your assets is a key tactic for investors who want to limit their risk. However, limiting your risk may limit the returns you’ll ultimately receive from your investment.
Detailed explanation-4: -Because they invest in fixed income securities, money market funds and ultra-short duration funds are subject to three main risks: interest rate risk, liquidity risk and credit risk. Interest rate risk measures the impact of changes in rates on the securities held by money market funds.