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Postby anbu.edu » Mon Oct 07, 2013 6:59 am

A money market fund invests in Treasury bills. What is the principal risk that the fund manager must hedge for?

a. Interest rate risk
b. Default risk
c. Funding liquidity risk
d. Asset liquidity risk

The answer is C- Can you explain why .. treasury bills are issued by GOVT then there is no question to funding liquidity risk right.. please help me

pradeeppdy
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Postby pradeeppdy » Mon Oct 07, 2013 9:07 am

Liquidity risk an investment that cannot be bought or sold quickly enough to prevent or minimize a loss. It can also be measured by Bid- ask spread.
And here this is money market fund and T- bill are short term and more liquid.

anbu.edu
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Postby anbu.edu » Mon Oct 07, 2013 11:52 am

which means ans C is wrong.. then which one is correct

anbu.edu
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Postby anbu.edu » Mon Oct 07, 2013 11:52 am

which means ans C is wrong.. then which one is correct

pradeeppdy
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Postby pradeeppdy » Tue Oct 08, 2013 5:18 am

No ans C is correct here , because T bills provides you more liquidity


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