A mutual fund is an institution that:
A)holds a diversified set of assets and sells shares to savers.
B)holds a diversified set of assets and buys shares directly from the government.
C)holds a single share and sells shares to savers.
D)buys physical capital for investors.

Question

Quizplus · Accepted Answer

A mutual fund is an institution that pools money from many investors and uses the money to buy a diversified set of assets, such as stocks, bonds, and other securities. The mutual fund then sells shares of the portfolio to individual investors, who are effectively buying a small piece of the overall portfolio. Therefore, option A is the correct choice as it describes the fundamental nature of a mutual fund. Options B, C, and D are incorrect as they do not accurately describe what a mutual fund does.

A Mutual Fund Is an Institution That