Question

Institutions develop to solve historically specific problems and then frequently persist long after that initial problem has been resolved. In what ways does this statement apply to the creation of money market mutual funds and their continued growth? In what ways does the statement apply to the Eurodollar market and its continued growth?

Answer 1

Owing to the Regulations Q, the bank interest was capped at 5.25%, which lead to the introduction of money market funds. Thus the funds set up by Bruce R. Bent and Henry B. R. Brown in 1971 in name of Reserve Fund to help investors earn more than the bank rate on some risk was later popularized into the whole industry of mutual funds which defines the way a person invests into the stock market now a days

Eurodollar market in simple words means those funds which are denominated in US Dollars but are kept outside USA but are not regulized by them. However in the present times there is no signle connection between Euro and Dollar for Eurodollar as it is also actively traded in China and Japan as well. Its usage as global finance started when Soviet Union was able to convince Italian banks to give more interest on their Eurodollars than USA. This lead to Eurodollar been seen as a popular currency exchange modes as there were limited regulations by USa