Explore BrainMass

Mutual fund risk exposure

A mutual fund's sales literature claims the fund has no risk exposure because it invests exclusively in federal government securities, which are free of default risk.

Is this true? Explain your answer.

Solution Preview

It is not true. It is correct that state that the securities are default risk free since these are federal government securities but these securities are exposed to other risks such as interest rate risk. Interest rate risk is the risk of the changes in the price ...

Solution Summary

The solution details the risk exposure for mutual funds