Reading 76: Alternative Investments -LOS p～ Q1-2

答案和详解如下：

1.While discussing the role of commodities as a vehicle for investment, a commentator makes the following statements:

Statement 1: During economic expansions, increasing supply tends to reduce the price of commodities.

Statement 2: Investing in commodities can give the investor exposure to fluctuations in production and consumption.

Are these two statements correct?

A)                                        Incorrect       Correct

B)                                        Correct  Correct

C)                                        Correct  Incorrect

D)                                        Incorrect       Incorrect

The correct answer was A)

Statement 1 is incorrect. During expansions, increasing demand for finished goods causes an increase in demand for the commodities needed to produce them, resulting in higher prices for commodities. Statement 2 is correct. Commodities can give an investor exposure to the economy’s production and consumption growth, with swings in commodity prices likely to be larger than changes in finished goods prices.

2.Money managers and individual investors can indirectly participate in the commodities market through all of the following investment vehicles EXCEPT:

A)   trading commodities in small denominations.

B)   futures contracts.

C)   bonds indexed to some commodity price.

D)   stocks of companies producing a commodity.

The correct answer was A)

Trading the commodities themselves is direct participation. Investors can participate indirectly though futures contracts, indexed bonds or certain commodity-linked equities.