- CFA Exams
- CFA Level I Exam
- Study Session 17. Alternative Investments
- Reading 50. Introduction to Alternative Investments
- Subject 5. Commodities and other altenative investments
CFA Practice Question
The benefits from direct commodity investments are least likely to include:
A. Inflation hedging.
B. Steady cash flows.
C. Portfolio diversification.
D. Outperformance during periods of economic growth.
A. Inflation hedging.
B. Steady cash flows.
C. Portfolio diversification.
D. Outperformance during periods of economic growth.
Correct Answer: B
Direct investments in commodities do not provide cash flows and generally have high diversifiable risk. However, there is evidence that commodities are good inflation hedge, provide a significant degree of portfolio diversification due to their low correlations with other asset classes, and perform well during periods of growth.
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