Income Beginner: Introduction to Money Market Funds

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1.
Money market mutual funds usually invest in long-term government bonds and CDs.
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False. Money market funds hold short-term debts of both government units and corporations.
2.
Money market funds that invest in short-term municipal securities are tax-exempt.
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True. Tax-exempt money market funds invest in short-term municipal securities.
3.
One of the major risks of money market mutual funds is _______ risk.
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Inflation. Because the returns of money market funds are relatively low, inflation can chip away at their purchasing power.
4.
You are allowed to write checks from a money market mutual fund.
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True. This is one of the many popular features offered by these funds, but you must write your checks for at least a certain amount, such as $250.
5.
Money market mutual funds invest in _______.
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Short-term debts. The money market is the market for the short-term debts of corporations and government units.