A commodity in which someone invests might include a: a. mutual fund. b. natural resource. c. thriving company. d. certificate of deposit.
The Correct Answer and Explanation is:
Correct Answer: b. natural resource
Explanation:
A commodity is a basic good used in commerce that is interchangeable with other goods of the same type. Commodities are often raw materials or primary agricultural products that can be bought and sold, such as gold, oil, wheat, or coffee. When someone invests in a commodity, they are typically investing in a natural resource or a product derived from a natural resource.
Natural resources like crude oil, natural gas, gold, silver, and agricultural products (corn, soybeans, etc.) are all examples of commodities. Investors may choose to invest in these resources directly through futures contracts or indirectly via commodity-based mutual funds or exchange-traded funds (ETFs). The value of commodities is influenced by global supply and demand, geopolitical events, weather conditions, and economic trends.
Let’s consider the other options:
- a. Mutual fund – This is a type of investment vehicle, not a commodity. It pools money from many investors to purchase a diversified portfolio of stocks, bonds, or other securities.
- c. Thriving company – Investing in a company means buying its stock or shares. While this is a common investment, companies are not commodities. They are legal entities that produce goods or services and have unique valuations based on performance and potential.
- d. Certificate of deposit (CD) – This is a low-risk financial product offered by banks that pays interest on a lump sum deposit for a fixed period. A CD is a savings instrument, not a commodity.
In summary, when talking about investing in commodities, we’re referring to tangible, often naturally occurring items like metals, energy sources, and agricultural products. These fall under the category of natural resources, making option b the correct answer.
