Tax & EvaluationPregunta 105 de 110
A retiree holds only long-term certificates of deposit and a money market fund. The greatest risk to this portfolio over a 25-year retirement is:
a.Purchasing power risk, because returns may not keep pace with inflation
b.Credit risk on federally insured deposits
c.Currency risk from foreign exchange movements
d.Prepayment risk on the money market fund
Explicación
Very low-volatility instruments protect principal but historically deliver little real return, so inflation erodes the portfolio's buying power over a long retirement. Insured deposits carry minimal credit risk, and a domestic portfolio has no meaningful currency exposure. Prepayment risk applies to mortgage-backed securities rather than to money market funds generally.
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