Products & Their RisksQuestion 114 of 398
An investor is concerned that rising interest rates will reduce the value of a fund's holdings. This concern is most relevant to which fund?
a.A money market fund holding only overnight paper
b.An equity growth fund
c.A commodity fund
d.A long-term bond fund
Explanation
Interest rate risk is the danger that rising rates reduce the market value of existing fixed-income securities, and it is greatest for funds holding long-maturity bonds. A long-term bond fund is therefore the most exposed, while money market funds with very short maturities have minimal interest rate risk.
Law Reference: Investment Company Act of 1940Practice all 398 questions free — no signup required.
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