Question

A review of the prospectus of an open-end investment company reveals that its portfolio consists entirely of CDs, Treasury bills, and repurchase agreements. This is probably a(n):

A)index fund.
B)balance fund.
C)money market fund.
D)exchange-traded fund (ETF).

Answer 1

A portfolio consisting of CDs, Treasury bills, and repurchase agreements suggests that the investment company is a money market fund, characterized by high liquidity and very low risk.

Step-by-step explanation:

An open-end investment company with a portfolio consisting entirely of CDs, Treasury bills, and repurchase agreements is most likely a money market fund. These funds are designed to offer investors high liquidity with a very low level of risk. Money market funds generally invest in government securities, certificates of deposit, commercial paper of companies, and other highly liquid and low-risk securities. Index funds, on the other hand, are designed to track the performance of a specific market index. Balance funds typically invest in a combination of stocks, bonds, and other securities. An exchange-traded fund (ETF) is a marketable security that tracks a stock index, a commodity, bonds, or a basket of assets like an index fund, but trades like a stock on an exchange.