It is a federally insured savings account, offered by banks and other depository institutions, that competes with money market mutual funds. What is it?
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The federally insured savings account that competes with money market mutual funds is called a Money Market Deposit Account (MMDA), also known as a Money Market Account (MMA).
An MMDA is a type of savings account that typically offers a higher interest rate than a traditional savings account. It allows individuals to earn interest on their deposits while maintaining the ability to withdraw funds at any time without penalty.
MMDAs are offered by banks and other depository institutions and are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor. This insurance means that if the institution were to fail, the depositor's funds would be protected up to the insured limit.
MMDAs compete with money market mutual funds, which are similar but not identical investment vehicles. Money market mutual funds are investment products offered by investment companies that invest in short-term, low-risk securities, such as Treasury bills and commercial paper. Unlike MMDAs, money market mutual funds are not insured by the FDIC and are not held at banks or depository institutions.
In summary, an MMDA is a federally insured savings account that offers a competitive interest rate and allows for easy access to funds, making it an attractive option for individuals looking for a low-risk, liquid investment. It competes with money market mutual funds, which are not insured and are offered by investment companies rather than banks or depository institutions.