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What is the purpose of a "Money Market Mutual Fund (MMMF)"?
- a)Provides long-term loans to industries
- b)Facilitates international trade transactions
- c)Lends money to agricultural activities
- d)Offers short-term investment revenue
Correct answer is option 'D'. Can you explain this answer?
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What is the purpose of a "Money Market Mutual Fund (MMMF)"?a...
MMMFs were established to provide short-term investment revenue by selling units to corporate and individual investors.
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What is the purpose of a "Money Market Mutual Fund (MMMF)"?a...
Purpose of a Money Market Mutual Fund (MMMF)
Money Market Mutual Funds (MMMFs) serve the purpose of providing short-term investment revenue to investors. Below are some key points explaining this purpose:
1. Safe and Liquid Investment Option:
- MMMFs invest in low-risk, short-term securities such as Treasury bills, commercial paper, and certificates of deposit.
- These investments provide a stable return with minimal risk, making MMMFs a safe option for investors looking for liquidity and capital preservation.
2. Diversification:
- MMMFs pool funds from multiple investors and diversify their investments across various securities.
- This diversification helps spread risk and minimize the impact of any individual security defaulting.
3. Accessibility:
- Investors can easily buy and sell shares of MMMFs on a daily basis, making it a highly liquid investment option.
- This accessibility allows investors to access their funds quickly when needed.
4. Competitive Yields:
- MMMFs aim to provide competitive yields compared to traditional savings accounts or CDs.
- By investing in a portfolio of short-term securities, MMMFs can generate income for investors through interest payments.
In conclusion, the primary purpose of a Money Market Mutual Fund (MMMF) is to offer investors a secure, liquid, and short-term investment option that provides competitive yields while preserving capital.
Money Market Mutual Funds (MMMFs) serve the purpose of providing short-term investment revenue to investors. Below are some key points explaining this purpose:
1. Safe and Liquid Investment Option:
- MMMFs invest in low-risk, short-term securities such as Treasury bills, commercial paper, and certificates of deposit.
- These investments provide a stable return with minimal risk, making MMMFs a safe option for investors looking for liquidity and capital preservation.
2. Diversification:
- MMMFs pool funds from multiple investors and diversify their investments across various securities.
- This diversification helps spread risk and minimize the impact of any individual security defaulting.
3. Accessibility:
- Investors can easily buy and sell shares of MMMFs on a daily basis, making it a highly liquid investment option.
- This accessibility allows investors to access their funds quickly when needed.
4. Competitive Yields:
- MMMFs aim to provide competitive yields compared to traditional savings accounts or CDs.
- By investing in a portfolio of short-term securities, MMMFs can generate income for investors through interest payments.
In conclusion, the primary purpose of a Money Market Mutual Fund (MMMF) is to offer investors a secure, liquid, and short-term investment option that provides competitive yields while preserving capital.
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What is the purpose of a "Money Market Mutual Fund (MMMF)"?a)Provides long-term loans to industriesb)Facilitates international trade transactionsc)Lends money to agricultural activitiesd)Offers short-term investment revenueCorrect answer is option 'D'. Can you explain this answer?
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