If a gas well driller wants to issue a bond whose interest or principal is tied to the price of natural gas, this would best be described as a(n):
A) income bond.
B) cash flow bond.
C) commodity bond.
D) adjustable rate convertible subordinated security.

Question

Quizplus · Accepted Answer

This type of bond is best described as a commodity bond because its payments are directly linked to the price of a commodity, in this case, natural gas. Commodity bonds' interest or principal payments fluctuate based on the price of the underlying commodity, making them distinct from more traditional fixed-income securities.

If a Gas Well Driller Wants to Issue a Bond