Ace the AFP Exam 2026 – Boost Your Financial Wizardry!

Money market funds (MMFs) are designed to offer investors a safe and liquid investment option, primarily holding securities that are short-term in nature. The correct statement is that all funds can value to a floating or variable net asset value (NAV). This is a critical feature of certain types of MMFs, particularly during periods of market stress or volatility.

Floating or variable NAV allows the value of these funds to fluctuate based on the underlying market value of the securities held, rather than maintaining a stable value of $1 per share, as traditional MMFs do. This shift towards a floating NAV is applicable to institutional prime money market funds and is a regulatory measure aimed at improving the resilience and transparency of MMFs.

This flexibility of valuation is crucial, as it enables the funds to more accurately reflect the real-time market conditions impacting their assets. The shift to a floating NAV underscores the evolving nature of MMFs and aligns them with greater market realities, particularly after the financial crises that highlighted vulnerabilities in fixed NAV practices.

The other statements do not accurately reflect the regulations and characteristics of MMFs. For instance, MMFs are governed under the Investment Company Act of 1940 rather than by the Office of the Comptroller of Currency. Additionally, MMFs are restricted