CFA Level I · CFA Level I Exam · Natural Resources
Which factor is most likely to drive the return of an investment in timberland that is separate from the price of timber itself?
Biological growth of the trees is the distinctive return driver of timberland. Trees add volume and value as they mature, regardless of timber price changes. Margin payments and contango relate to futures contracts, not direct ownership of timberland.
- ABiological growth of the trees over timeCorrect
- BDaily mark-to-market margin payments
- CContango in the futures curve
Explanation
Timberland returns come from biological growth, which adds volume and value to the trees, along with timber price changes and land value changes. Margin payments and contango relate to futures positions, not direct timberland ownership.
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