liquidity

For the first question, I chose B since you would clearly wanna be in stocks during an early upswing and “ride the wave.” I agree with the commodities statement, but this question would be only half wrong as opposed to B, which is 100% wrong. If the economy started to show signs of expansion, why would you want a fixed return when you can make more $$$ in a rising stock market?
For the last question, I chose B since you would know in actual dollar terms what your losses are. The question did not state whether his fund was short biased, so if his betas were high and the market collapsed, he would be making $$$.
I don’t have the answer for the 2nd question.