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1.
For many, a disadvantage of certificates of deposit is that _______.
You must hold them for a set period. There are early-withdrawal penalties if you take your money out early.
2.
Bank-loan funds have very little interest-rate risk to worry about.
True. Because they invest in floating-rate loans, bank-loan funds have very little interest-rate risk.
3.
How do ultrashort-bond funds limit risk?
They all invest in short-term securities, typically with durations of six months or less. Not all ultrashort-bond funds stick exclusively with high-quality securities. And they are not insured.
4.
Whats the biggest benefit to using a certificate of deposit (CD) to fund a short-term goal?
The return on a CD is guaranteed. A CDs return is predictable. Buy a 12-month CD promising X% rate and thats exactly what youll get.
5.
Whats the difference between an ultrashort-bond fund and a short-term municipal (muni) bond fund?
The short-term municipal bond fund owns longer-term securities than the ultrashort-bond fund. Short-term muni bond funds buy longer-term securities than ultrashort-bond funds do. Muni funds own bonds whose interest is exempt from federal income taxes; ultrashort-bond funds buy taxable bonds.
