explain what is a principle-protected note

Expert Solution

Principal protected note is a note which specify an investment contract offering a guaranteed rate of return of the principal and maybe some additional returns too.

It offers that there would not be any dilution in the overall amount of capital anytime during the investment period. It is a perfect hedge against any kind of volatility which can cause a substantial damage to the overall value.

It is preferred by investors who are risk averse and who also wants to have a moderate rate of return.

Typically principal protected notes guarantee 100% of invested capital, so as long as the note is held to maturity irrespective of the market conditions, the investor will receive back the entire payment.

Principal Protected notes may offer array of benefits such as:-

A.Weekly liquidity.

B.Potential for leveraged returns

C.Enhanced income potential

These are the few of attractive features associated with principal protected notes which tempts an investor to invest into such notes.

jeff jeffy answered 2 years ago

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