Immediate Liquidity Requirement for Commercial Real Estate Down Payment
A commercial contractor needs $150,000 in cash within 45 days to close on a parcel of real estate. The funds are currently in cash. He wants to earn some return over the next month without risking principal. What should the representative recommend?
A Treasury money market mutual fund provides daily liquidity, maintains a stable $1.00 NAV, and virtually eliminates default and interest rate risk for a 45-day horizon.
Complete Analysis & Legal Rationale
With funds needed in 45 days, any price volatility could cause principal loss before the closing date. Commercial paper has a 1-year maturity (illiquid before maturity), dividend ETFs fluctuate with the stock market, and closed-end funds trade at fluctuating discounts.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Stable $1.00 NAV and immediate redemption liquidity preserve principal for a 45-day closing.
1-year paper locks up funds past the 45-day required closing deadline.
Equities can experience sharp selloffs over any 45-day window.
Closed-end funds fluctuate on market supply/demand and can trade at deep discounts.
Official Standard: Governs stable $1.00 NAV maintenance and portfolio maturity constraints.