Question
In: Finance
Shares in money market mutual funds are priced on the basis of a. Net asset value...
Shares in money market mutual funds are priced on the basis of
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a. Net asset value |
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b. Amortized cost |
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c. Real-time values |
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d. The yield on 91-day Treasury bills |
Solutions
Expert Solution
Sol:
Shares in money market mutual funds are priced on the basis of Amortized cost.
Answer is b. Amortized cost
Shares in money market mutual funds are priced on the basis of amortized cost with the assumption that the shares in the portfolio are held until the maturity of the fund. Amortized cost method let the money market mutual funds to maintain their Shares NAV to $1 as historically they have priced the shares in the funds at $1. The market value of the shares in the shadow price of the portfolio which is computed keeping the shares held in the portfolio as base.
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