Prime Rate Fund
A mutual fund that invests predominantly or exclusively in corporate loans. That is, the prime rate fund buys corporate loans (which are distinct from bonds) from the banks making them and passes the interest to shareholders. The risk of a prime rate fund depends on the weighted average risk of the loans represented in it.
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A mutual fund that invests in short-term bank loans that have been made to companies that often have less than prime credit ratings. Yields from owning these funds change regularly as loan interest rates are reset. Prime-rate funds generally provide substantially higher yields than money market funds.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.