Multiple choice

Short Term bond funds are

  1. low risk funds

  2. moderate risk funds

  3. high risk

  4. None of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Short-term bond funds invest in debt securities with shorter maturities (typically 1-3 years). These funds have moderate risk: they offer lower interest rate risk than long-term funds (prices less sensitive to rate changes) but still carry credit risk from the underlying bond issuers. They are not low-risk (that would be liquid funds or bank deposits) and certainly not high-risk (like equity funds or long-term gilt funds). Option B is correct as moderate risk accurately reflects their risk-return profile.

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