Product performance
Product manufacturers are aware that 100% participation will almost always be preferred by investors, even of that means the returns may be lower than for a structured investment that offers a rate of less than par.
This month we compare two six-year principal-protected products linked to the FTSE 100 index. The first product has 100% gearing with a maximum return of 59%, while the second offers uncapped index-linked returns through its participation rate of 83%. The products were both priced by fixing the issue price at 100%. To find the cap for the first product we set the participation to 100% and solved for the price. To find the gearing for the second product, we just solved for the price allowing the
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