If money market funds definitely expect interest rates to increase, they will ____ their average asset maturity.

Question

Quizplus · Accepted Answer

Money market funds tend to shorten their average asset maturity when they expect interest rates to increase. This is because shorter-term securities earn lower interest rates than longer-term securities. By shortening their average asset maturity, money market funds can quickly reinvest in higher yield securities as interest rates rise.

If Money Market Funds Definitely Expect Interest Rates to Increase