Investment Company and Variable Contracts Products Representative (Series 6)Practice Exam

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What type of fund is focused primarily on short-term debt securities?

Bond fund
Stock fund
Money market fund
Index fund

The correct answer is: Money market fund

The focus of a money market fund is primarily on short-term debt securities, such as Treasury bills, commercial paper, and certificates of deposit. These funds are designed to provide liquidity and are considered low-risk investments, making them suitable for investors looking for a place to park their money with modest returns while retaining the principal amount. In contrast, a bond fund primarily invests in long-term debt securities, which may not offer the same liquidity as money market instruments. A stock fund invests in equities and is concerned with shares of companies, making it unrelated to debt securities. An index fund aims to replicate the performance of a specific index and can include a mix of equities and bonds, but it does not specifically target short-term debt. Therefore, the emphasis on short-term debt securities distinctly aligns with the characteristics of a money market fund.