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CMA Intermediate · Financial Management and Business Data Analytics · Money Market

Which feature best distinguishes a money market mutual fund (liquid fund) from an equity mutual fund in India?

A money market mutual fund invests mainly in short-term debt and money market instruments such as treasury bills, commercial paper and certificates of deposit, aiming for liquidity and capital stability. Equity funds hold shares for growth, and no mutual fund guarantees returns.

  1. AIt invests mainly in short-term debt and money market instruments with residual maturity of up to a year or lessCorrect
  2. BIt invests mainly in listed equity shares of large companies for long-term capital growth
  3. CIt invests only in real estate and gold for inflation protection
  4. DIt guarantees a fixed return to every investor irrespective of market movements

Explanation

Money market mutual funds pool investor money to invest in short-term instruments such as treasury bills, commercial paper, certificates of deposit and call money. Equity funds hold shares for long-term growth. No mutual fund guarantees a fixed return, so the last option is wrong.

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