alleryStart learning →What does a mutual fund do with the money its investors put in?
AIt lends the money out to corporate borrowers
BIt holds the money on deposit until redemption
CIt pools the money to buy a selection of securities
DIt passes the money to a single listed company
Answer & Solution
Correct answer: C. It pools the money to buy a selection of securities
1. A mutual fund is a financial-service company that pools its investors' funds.
2. It uses that pool to buy a selection of securities that meet its stated investment goals.
3. Each fund focuses on one goal, such as growth or income, and some specialize by industry, region or asset.
4. Investing in one buys a share in a large, professionally managed portfolio of stocks and bonds.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 16 "Understanding Financial Management and Securities Markets", section 16.6 Securities Markets_
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