Type of bond in which payments are made on basis of inflation index is classified as

borrowed bond
purchasing power bond
surplus bond
deficit bond

The correct answer is: B. purchasing power bond.

A purchasing power bond is a type of bond that is indexed to inflation. This means that the interest payments on the bond are adjusted for inflation, so that the bondholder receives a return that is not eroded by inflation.

A borrowed bond is a bond that is issued by a government or corporation to raise money. The borrower agrees to repay the loan, with interest, over a specified period of time.

A surplus bond is a bond that is issued by a government or corporation when it has more money than it needs. The bond is used to invest the surplus funds and earn interest.

A deficit bond is a bond that is issued by a government or corporation when it needs to borrow money to cover its expenses. The bond is used to finance the government’s or corporation’s deficit.