Which bond is designed for the protection of investors in case of defaults by securities dealers?

The blue sky bond is specifically designed to protect investors against losses resulting from defaults by securities dealers. This type of bond acts as a safeguard, ensuring that in the event a dealer fails to meet their obligations—such as failing to repay investors or provide promised returns—investors can claim against the bond for reimbursement.

The term "blue sky" generally relates to regulations that aim to protect against securities fraud, and the bond itself serves as a financial safety net that reinforces the integrity and reliability of the securities market. This is crucial in maintaining investor confidence and promoting a sense of security when engaging in securities transactions.

Other types of bonds mentioned, such as supply bonds, probate bonds, and conservation bonds, do not serve this specific purpose and focus on different areas, like ensuring the performance of contractual obligations, managing estates, or supporting environmental conservation efforts, respectively. They are not aimed at investor protection in the securities context, highlighting why the blue sky bond is the most relevant choice in this scenario.