Liquidity is important to a mutual fund because:

Question

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Liquidity is important to a mutual fund because the fund's shareholders may want to redeem their shares at any time. If the fund lacks liquidity, it may not have enough money on hand to meet shareholder redemption requests, which could harm the fund's reputation and performance. Shareholder redemptions are also part of the normal operations of a mutual fund, as investors buy and sell shares in the fund over time. Without liquidity, the fund would not be able to provide this essential service to its investors.

Liquidity Is Important to a Mutual Fund Because