CFA Practice Question

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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.
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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