Which one of the followings is a mutual fund that pools the funds of many small investors and purchases high-return, short-term marketable securities?
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A. B. C. D.C
The correct answer is C. Money market mutual funds.
Money market mutual funds are investment vehicles that pool money from many individual investors to purchase a portfolio of short-term, low-risk securities such as Treasury bills, commercial paper, and certificates of deposit. These funds are managed by professional fund managers and typically have a net asset value (NAV) of $1 per share.
Money market mutual funds are popular among investors seeking a low-risk, high-liquidity investment option that offers a higher return than traditional savings accounts. They are regulated by the Securities and Exchange Commission (SEC) and offer a level of diversification and professional management that is not available to most individual investors.
Money market deposit accounts (A) are a type of savings account offered by banks and credit unions that typically pay a higher interest rate than traditional savings accounts. However, they are not considered mutual funds and do not pool investor funds to purchase securities.
Negotiable order of withdrawal (NOW) accounts (B) are checking accounts that allow account holders to write checks and withdraw funds at any time. They are not mutual funds and do not pool investor funds to purchase securities.
Asset management accounts (D) are investment accounts offered by brokerage firms that allow investors to pool multiple types of investments, such as stocks, bonds, and mutual funds, in a single account. While these accounts may include money market mutual funds, they are not exclusively dedicated to this type of investment.