CFA Level I · CFA Level I Exam · Natural Resources
Which of the following is most likely a defining characteristic of natural resources as an alternative investment category?
Natural resources investments are defined by their link to physical assets such as commodities, farmland and timberland. Their value depends on supply and demand for those assets, unlike fixed-income instruments whose returns come from contractual interest payments.
- ACash flows are fixed by contract
- BValue is tied to physical assets such as land, commodities or timberCorrect
- CReturns come mainly from interest income
Explanation
Natural resources investments are claims on physical assets such as commodities, farmland and timberland, so value depends on the supply and demand for those assets. Fixed contractual cash flows and interest income are features of fixed-income instruments, not natural resources.
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