Explanation

Convenience yield is primarily associated with commodities in short supply. Here's why:

What is Convenience Yield?

Convenience yield is the non-monetary benefit or premium associated with holding a physical commodity rather than a futures contract on that commodity. It represents the advantage of having immediate access to the physical commodity, especially when:

1. The commodity is in short supply
2. There are supply disruptions
3. There are logistical constraints

Why Option C is Correct:

• Commodities in short supply have higher convenience yields because holding the physical commodity provides significant benefits when availability is limited
• This yield compensates holders for storage costs and reflects the scarcity value
• It's a key component in the cost-of-carry model for commodity pricing

Why Other Options are Incorrect:

• A. High-yield bonds: These have credit risk premiums, not convenience yields
• B. Dividend-paying stocks: These provide dividend income, not convenience yields

Key Concept:

Convenience yield = Benefit of physical ownership - Storage costs - Financing costs

It's most significant for commodities that are difficult to store, have seasonal production patterns, or face supply constraints.