A money market fund's investments must have a rating in one of the two highest short-term rating categories. Which statement best describes this requirement?

• A. Any rating
• B. No rating required
• C. In the two highest short-term rating categories
• D. Only long-term rating categories

Answer: (C)

Money market funds aim for very high credit quality and liquidity, so they must invest in short‑term debt that is rated in the top two short‑term categories by a recognized rating agency. These top categories signal strong ability to meet short‑term obligations and minimize credit risk, which is essential for preserving capital and ensuring liquidity for investors seeking to redeem at net asset value. The correct description, therefore, is that investments must be in the two highest short‑term rating categories. The other options would either permit lower-quality or unrated instruments, or misstate the focus on long‑term ratings rather than short‑term credit quality.