Income Beginner: Introduction to Money Market Funds

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1.
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.
2.
All of the following are privileges of owning a money market fund except that ______.
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All of the above may be privileges of a money market fund. Money market funds have many privileges, which make them attractive and versatile.
3.
Money market funds that invest in short-term Treasury bills have yields that are ________ than non-Treasury money market funds.
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Lower. US Treasury money market funds generally have lower yields than other money market funds.
4.
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.
5.
Due to the stability of the underlying instruments, money market fund shares are guaranteed to remain at $1.00.
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False. They cannot guarantee this, although money market funds usually keep their net asset values at $1 per share.