Which of the following is classified as a money market mutual fund? (1 point)
An account giving 0.5% interest with no other limitations.
A deposit that has to be maintained in the bank for 1 year in exchange of a 2% interest.
A "basket" of money pooled in by many investors to acquire securities based on the value of cash.
An investment in stocks.
A "basket" of money pooled in by many investors to acquire securities based on the value of cash is classified as a money market mutual fund.
The option that is classified as a money market mutual fund is: A "basket" of money pooled in by many investors to acquire securities based on the value of cash.
To determine which of the options is classified as a money market mutual fund, we need to understand what a money market mutual fund is. A money market mutual fund is a type of investment fund that typically invests in short-term, low-risk securities such as Treasury bills, certificates of deposit, and commercial paper. These funds aim to provide investors with easy access to short-term, relatively safe investments.
Now, let's analyze each of the given options:
1. An account giving 0.5% interest with no other limitations: This option does not specify that it is a mutual fund or indicate any investment in short-term, low-risk securities. Therefore, it is unlikely to be classified as a money market mutual fund.
2. A deposit that has to be maintained in the bank for 1 year in exchange for a 2% interest: While this option involves a deposit in a bank for a specific period of time, it does not mention any pooling of funds or investment in securities. Therefore, it is also unlikely to be a money market mutual fund.
3. A "basket" of money pooled in by many investors to acquire securities based on the value of cash: This option describes the key characteristic of a money market mutual fund. It involves pooling money from multiple investors to acquire short-term securities based on the value of cash. This aligns with the definition of a money market mutual fund, so this option is most likely the correct answer.
4. An investment in stocks: This option does not describe the characteristics of a money market mutual fund. Money market funds typically invest in short-term securities rather than stocks, which are considered riskier and more volatile. Therefore, this option is unlikely to be classified as a money market mutual fund.
Based on the above analysis, option 3, which involves pooling funds to acquire securities based on cash value, is most likely to be classified as a money market mutual fund.