FAQs: Equity Index-Linked Note

1. What is an equity index-linked note?

An equity index-linked note is a debt instrument that affords the owner interest payments based on the performance of an equity index and, sometimes, a guaranteed return. The terms of such notes vary, but interest payments are typically based on any increase in the value of a specified equity index (e.g., Standard & Poor’s 500 Index). A note may also guarantee the return of the investor’s principal, insulating the investor against decreases in the value of the equity index to which the note is linked. In exchange for such protection against risk, a note usually will offer an investor a return that is less than 100% of the value of any increase in the equity index to which it is linked, or a note may establish a maximum return.

 

This guide is not intended to provide investment advice, and you should not rely on statements in this guide when making investment decisions.

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