Reading 74: Alternative Investments-LOS q 习题精选 2011, motivation, investing, border

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Session 18: Alternative Investments
Reading 74: Alternative Investments

LOS q: Explain the motivation for investing in commodities, commodities derivatives, and commodity-linked securities.

 

 

Commodity-linked securities may be appropriate for investors:

A) seeking speculative profits in the commodities market.

B) seeking investments that are negatively correlated with inflation.

C) prohibited from owning physical assets.

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Commodity-linked securities are not derivatives, though their performance is linked to some commodity price. Commodity-linked securities are positively correlated with inflation. Commodity-linked securities are an appropriate investment for those who are prohibited from directly owning real assets such as commodities, but wish to participate in the market.

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All of the following are examples of commodity-linked equities EXCEPT:

A) a gold mining company.

B) an oil and gas exploration company.

C) a supermarket operating company.

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The stocks of a gold mining company and an oil and gas exploration company are highly correlated with commodities prices, because their values are closely linked to the price of the commodities they produce. A supermarket chain will be more diversified, and many other factors will contribute to the value of the company.

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In periods of rising inflation, commodities can act as a hedge to a portfolio of stocks and bonds because the:

A) commodities will not be affected by a rise in inflation.

B) commodities will typically appreciate in price while the prices of the stocks and bonds may decline.

C) commodities can provide current income to offset any price decreases in the stocks and bonds.

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In a period of rising inflation, the prices of commodities tend to go up, while the prices of stocks and bonds often tend to go down. Thus, the commodities position will act as an inflation hedge for the stock and bond portfolio.

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