Five Below Zero is a new ski resort in Colorado. Five Below Zero is co

Five Below Zero is a new ski resort in Colorado. Five Below Zero is concerned that an abnormally warm winter will prevent the accumulation of snow needed to have a profitable ski season.

Five Below Zero purchased a contract that will pay a lump sum if the daily high temperature exceeds 30 degrees for more than 12 days between January 1st and March 31st. The contract Five Below Zero purchased is called a(n)
A) catastrophe bond.
B) weather option.
C) interest rate swap.
D) convertible bond.

ANSWER

Answer: B