Income Beginner: Introduction to Money Market Funds

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Money market funds that invest in short-term municipal securities are tax-exempt.

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True

False

True. Tax-exempt money market funds invest in short-term municipal securities.

The Federal Deposit Insurance Corporation and the National Credit Union Share Insurance Fund do not insure money market mutual funds.

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True

False

True. Some investors consider this a disadvantage.

Money market mutual funds usually invest in long-term government bonds and CDs.

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True

False

False. Money market funds hold short-term debts of both government units and corporations.

All of the following are privileges of owning a money market fund except that ______.

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You may be able to withdraw funds from ATMs

You may write checks

You may use it for a business account

All of the above may be privileges of a money market fund.

All of the above may be privileges of a money market fund. Money market funds have many privileges, which make them attractive and versatile.

One of the major risks of money market mutual funds is _______ risk.

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Currency

Tax

Inflation

Inflation. Because the returns of money market funds are relatively low, inflation can chip away at their purchasing power.

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