Which of the following is a primary characteristic of commodities as an investment vehicle?

• A. They are physical goods traded in standardized contracts.
• B. They guarantee fixed interest payments over time.
• C. They are always less risky than government bonds.
• D. They represent ownership in a corporation.

Answer: (A)

Verified step by step guidance

1. Understand the definition of commodities in the context of investment vehicles. Commodities are basic physical goods such as oil, gold, or wheat that are used in commerce.
2. Recognize that commodities are typically traded on exchanges through standardized contracts, which specify the quantity and quality of the commodity being traded.
3. Compare commodities to other investment types: fixed interest payments are characteristic of bonds, ownership in a corporation relates to stocks, and risk levels vary widely across asset classes.
4. Identify that the key feature distinguishing commodities is their physical nature and the use of standardized contracts for trading, rather than guaranteed returns or ownership rights.
5. Conclude that the primary characteristic of commodities as an investment vehicle is that they are physical goods traded in standardized contracts.