Municipal Bonds
What type of municipal security is commonly held by money market funds due to its liquidity features?
Tax-exempt money market funds often hold VRDNs for liquidity and short duration.
Complete Analysis & Legal Rationale
VRDNs are popular in municipal money market funds because their put feature provides daily/weekly liquidity, and floating rates mean minimal interest rate risk. They effectively trade like short-term instruments.
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:
GO bonds are long-term and don't have the liquidity features of VRDNs.
Revenue bonds are typically long-term without put features.
Matches the verified teaching point in the explanation.
IDBs are long-term private activity bonds.
Official Standard: Outline-level citation pending rule-specific upgrade. Verify against current FINRA Series 7 outline.