Low-risk investment securities held by corporate entities as liquid reserves are classified as________________?
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Answer: D. Money market mutual funds
Explanation
Money market mutual funds pool investor money to buy low-risk, short-term debt securities. Corporate entities utilize these funds as safe, highly liquid repositories for cash reserves. Stable net asset values allow businesses to withdraw capital immediately without loss. Money market funds invest in commercial paper, treasury bills, and certificates of deposit. These instruments maintain very short average maturities to minimize interest rate risk. Regulatory guidelines enforce strict portfolio quality standards on money market fund managers.
Corporate treasurers rely on money market funds to earn modest yields on idle operating cash. Institutional investors use these liquid funds as temporary parking spots during market turmoil. Risk averse investors choose money market mutual funds for capital preservation purposes. Treasury bills are individual government securities rather than mutual fund pooled portfolios. Commercial paper represents unsecured corporate debt rather than a pooled investment fund. Negotiable certificate of deposit is a single bank deposit instrument rather than a mutual fund.
- Subject
- Accounting and Finance
- Category
- Finance
- Topic
- —
- Difficulty
- medium
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