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LOS p: Discuss the role of commodities as a vehicle for investing in production and consumption. ffice ffice" />
Q1. Money managers and individual investors can indirectly participate in the commodities market through all of the following investment vehicles EXCEPT:
A) futures contracts.
B) trading commodities in small denominations.
C) stocks of companies producing a commodity.
Correct answer is B)
Trading the commodities themselves is direct participation. Investors can participate indirectly though futures contracts or certain commodity-linked equities.
Q2. 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?
Statement 1 Statement 2
A) Incorrect Correct
B) Correct Correct
C) Incorrect Incorrect
Correct answer is 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.
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发表于 2009-2-28 18:00
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