Final answer:
An equity-indexed life policy is usually tied to stock market performance, offering a mix of a death benefit and the potential for investment growth based on a stock index.
Step-by-step explanation:
An equity-indexed life policy is a type of life policy that provides both a death benefit and potential for growth, with the growth component tied to the performance of a stock market index. In this case, if Dylan is considering purchasing an equity-indexed life policy, it will likely be tied to: a) Stock market performance. This type of policy typically guarantees a minimum return while also offering the potential for higher gains based on the chosen stock index's performance.
It's important to note that this differs from products like indexed bonds mentioned in the supplementary information, which are tied to inflation rates. Indexed bonds promise to pay a real rate of interest above whatever inflation rate occurs, thus offering protection against inflation rather than exposure to stock market fluctuations. This distinction helps in understanding the different financial instruments and the indexes they can be associated with.