Which of the following is not a reason the expected returns on money market funds (MMFs) are low relative to bonds or stocks?
A)The credit risk of MMFs is normally perceived to be lower than that of corporate bonds.
B)MMFs have higher interest rate risk than bond funds.
C)MMFs consistently generate positive returns over time, whereas bond and stock funds can experience negative returns.
D)All of the above are reasons the returns on MMFs are low relative to bonds or stocks.

Question

Quizplus · Accepted Answer

MMFs have lower expected returns compared to bond or stock funds because they typically have lower risk, with the credit risk of MMFs normally perceived to be lower than that of corporate bonds, and they consistently generate positive returns over time. However, they do have higher interest rate risk than bond funds, which is the reason for their lower expected returns. Therefore, option B is not a reason why the expected returns on MMFs are low relative to bonds or stocks.

Which of the Following Is Not a Reason the Expected