Principles of Investment Practice Exam

Investors typically purchase a commodity with the expectation that its price will appreciate over time. This belief is based on various factors, including supply and demand dynamics, economic conditions, inflation, and geopolitical events that can influence commodity prices. When investors anticipate that a commodity's value will increase, they expect to sell it later at a higher price than the purchase price, resulting in a profit.

Commodities are often viewed as a hedge against inflation and currency fluctuations. As economies grow and demand for certain commodities rises, investors are likely to see potential in these assets, believing that their prices will increase as a result. This fundamental expectation is why purchasing a commodity is usually associated with the hope of price appreciation.