Unit 10-Money Market Funds Flashcards
Money market instruments require minimum investments of ____; the average maturity is ____; money market shares are priced at ___ and interest is paid in ____.
$10K-$1 million; 50-70 days; $1 per share; additional money market fund shares
As of early 2023, ___ was invested in tax-exempt, government or prime (general purpose) money market funds; now that’s over ___ as of November 2024.
$4.7 trillion; $6 trillion
Categories of money market funds include
1) ____ hold all sorts of instruments and normally pay the highest yields within money market arena. This is the most ___ type of money market fund. As of January 2024, Vanguard’s money market fund was yielding ___.
2) ___ only
3) ___ government
4) ___-free
1) Taxable (general purpose); popular; 5.3% (7-day SEC yield)
2) Treasury
3) US
4) Tax
Money market funds appeal to investors …
1) As a ___ in the investment mix
2) As a ___ for possible emergencies or big ticket expenditures only a few years away
3) As a ___ while client tries to figure out what to do with a lump sum they received.
4) A means of getting ____
1) cash component
2) savings vehicle
3) parking place
4) tax-free income
Commercial paper are short-term, ____ issued by large, creditworthy ____ & ___ companies. Basically equivalent to T-bills, commercial paper is sold in multiples of ___ with maturities ranging from ___.
unsecured IOUs; industrial & financial; $100K; 30-270 days.
Repurchase agreements are where a dealer sells __ to an investor, usually __, and buys them back the following day at a slightly higher price. The small price difference is an implicit __.
government securities; overnight; overnight interest rate
Eurodollar CDs are dollar-denominated obligations issued by a ___ of a US bank or a foreign bank. They offer __ yields than their domestic counterparts because they are less ___ and slightly riskier than their domestic counterparts.
foreign branch
higher; liquid
Yankee CDs are issued by ____ with branches in the US; these are dollar-denominated.
large foreign banks.
Except for ___ securities, a money market fund cannot invest ___ of its assets in the paper of a single issuer.
Money market funds cannot place more than ___ in riskier second-tier paper.
US government; more than 5%; 5% of its assets
Portfolio turnover for a money market fund is an irrelevant metric because 1) it does not imply ___ because brokerage fees are not incurred on ___.
2) there are no distributions of ___.
1) increased costs; sales or purchases of money market securities
2) capital gains.
The SEC requires money market funds to
1) keep at least ___ of their assets in securities maturing within ___
2) post holdings ___
3) perform ___
1) 30%; 7 days
2) online each month
3) stress tests
Clients of money market funds can find ____ on the SEC website; there is a __ delay in disclosure.
shadow pricing data; 2-month
Money market funds have had ___ for each of the past 10+ years.
negative real returns (yields minus inflation)
The benefits of money market funds are questionable because
1) you can have similar LIQUIDITY in a ____
2) the ___ cost of having these funds is high especially if you consider what else you can lean on in case of emergency-credit card, liquidating part of a portfolio, a short-term loan from ___.
3) ___ are much better alternatives for giving your portfolio diversity.
1) short- or intermediate-term bond fund
2) opportunity; family
3) short- and intermediate-term bond funds
