CFA Level I · CFA Level I Exam · Natural Resources
Compared with most other real assets, timberland is most likely to offer investors which of the following features?
Timberland most likely offers biological growth that adds value regardless of commodity prices. Trees keep growing in volume and quality over time, and owners can delay harvest when timber prices are weak, so value can build even without price gains.
- ABiological growth that adds value regardless of commodity pricesCorrect
- BReturns driven mainly by short-term rental income
- CImmediate harvest requirements at fixed annual dates
Explanation
Trees keep growing in volume and quality, so value can increase even when prices are weak. Harvest can be deferred, which gives timberland flexibility. Returns are not driven mainly by rental income, and harvest is not forced on fixed dates.
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