Despite the stock market crash in March 2020, there is still no way around the stock market for investors who want a return above the inflation rate. With structured investment products, such as reverse convertible bonds, which relate to one or more stocks, investors can achieve respectable income within a relatively short period of time, even when stock prices are falling significantly. However, in such turbulent times on the stock exchange, it is very important to take a look at the detailed features of the products.
If at the beginning of the year one had relied on a product with permanent barrier monitoring during the entire term, then a barrier would have been touched or undershot by the majority of the shares with some certainty. In the case of a bond or a certificate, the barrier of which is only activated at the end of the product’s term, there is a chance of receiving the capital investment including interest after the massive price recovery on the stock exchanges despite the interim crash. RCB is currently offering a reverse convertible bond Protect on the US technology stocks IBM (ISIN: US4592001014), AT&T (ISIN: US00206R1023) and Microsoft (ISIN: US5949181045) with a barrier activated only at the end of the term.
6.60% interest and 41% safety buffer
On September 9th, 2020 closing prices of the IBM, AT&T and Microsoft shares will be fixed as base prices for the 6.6% US-Technologie Plus Reverse Convertible. The barriers activated on the valuation day (9/7/22) will be at 59 percent of the respective strike prices. Irrespective of the price development of the shares, investors will receive an interest coupon of 6.60 percent after each of the bond’s two maturity years, namely on 9/10/21 and 9/10/22.
If all three shares are quoted above the barriers on 9/7/22, the bond will be repaid on 9/12/22 at its issue price of 100 percent. On the other hand, if on that day one or more shares are in the red by more than 41 percent compared to the base price, then the bond will be redeemed by allocating the share with the worst performance.
The RCB-6.60% US-Technologie Plus Reverse Convertible, due on September 12th, 22nd, ISIN: AT0000A2HU42, can be subscribed until September 8th, 2020 in a denomination of 1,000 euros with 100 percent.
CertificateReport Conclusion: This bond enables a gross annual return of 6.60 percent in the next two years if the prices of the US technology giants Microsoft, AT&T and IBM on 9/7/22 have not lost at least 41 percent of their base prices determined on 9/9/20.
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