Certified Management Accountant Practice Exam 2025 – The Comprehensive All-in-One Guide to Exam Success!

Question: 1 / 430

Which of the following is a characteristic of money market mutual funds?

High-risk investment

Investments are primarily in long-term bonds

Pooled assets of investor-owners for lower risk

Money market mutual funds are designed to offer investors a relatively safe place to invest cash in the short term. A key characteristic of these funds is that they pool assets from multiple investors. This pooling of funds allows for diversification, which significantly lowers the overall risk compared to individual investment options. The diversified portfolio typically consists of short-term, high-quality debt instruments, such as Treasury bills and commercial paper, which are less susceptible to large fluctuations in value.

By being low-risk, they attract conservative investors looking for a safe place to park their cash while still earning a small return. This is especially appealing during times of economic uncertainty when investors may prioritize the preservation of capital. Therefore, the pooling of assets contributes to managing risk effectively, making this characteristic a defining feature of money market mutual funds.

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