Bond is a debt instrument where the bond issuer issues the bond for purchase. It is also known as fixed income security, as a bond usually gives regular or fixed return.
Typical bond issuers include: Sovereign entities, Governments/Government agencies, Banks, Non-bank financial institutions, & Corporations.
Structured Notes is a debt instrument, embedded with derivatives, which provides you an opportunity to enjoy a potential return or yield enhancement linked to the performance of the underlying assets. You may customise the terms with different asset classes, flexible structures, level of capital protection and investment tenures to match with your investment objectives.
|
For Illustrative Purposes Only
|
|
|---|---|
| A client would like to invest in Bond A on 1st July 2017 with bond features as below: | |
| Client Buying Price | 102% |
| Face Value | US$100,000 |
| Coupon Rate / Payout Frequency / Payout Date | 5% p.a. / Once a Year / 31 December |
| Bond Tenor / Bond Maturity Date | 4.5 Years / 31 December 2021 |
| Purchase of Bond | |
| Client Buying Bond at Bond Price of 102% | US$100,000 x 102% = US$102,000 |
| 6-month Accrued Interest Paid to Seller | US$100,000 x 5%p.a. x 6 / 12 = US$2,500 |
| Total Investment Amount Required | US$102,000 + US$2,500
= US$104,500 |
| Case 1: Holding the Bond until Maturity | |
| Client will receive coupon interest every year until maturity (i.e. 5 coupon payments in total during 2017 – 2021) and the bond face value on the maturity date. | |
| Coupon Payment Received | US$$100,000 x 5%p.a. x 5 (i.e. 5 years)
= US$25,000 |
| Bond Face Value upon Maturity | US$100,000 |
| Total Receivable | US$25,000 + US$100,000 = US$125,000 |
| Total Return | US$125,000 – US$104,500 = US$20,500 |
| Case 2: Sell the Bond on 1st Oct 2018 (i.e. 1.25 years later) at the Bond Price of 105% | |
| Client will receive funds from selling the bond with bond price of 105% plus the accrued interest paid by buyer for holding the bond for 9 months after previous coupon payment on 31 December 2017. | |
| Client Selling Bond at Bond Price of 105% | US$100,000 x 105% = US$105,000 |
| Coupon Payment Received by Client on 31 Dec 2017 | US$100,000 x 5%p.a. = US$5,000 |
| Accrued Interest Received from Buyer | US$100,000 x 5%p.a. x 9 / 12 = US$3,750 |
| Total Receivable | US$105,000 + US$5,000 + US$3,750 = US$113,750 |
| Total Return | US$113,750 – US$104,500
= US$9,250 |
| Case 3: Sell the Bond on 1st Oct 2018 (i.e. 1.25 years later) at the Bond Price of 94% | |
| Client will receive funds from selling the bond with bond price of 94% plus the accrued interest paid by buyer for holding the bond for 9 months after previous coupon payment on 31 December 2017. | |
| Client Selling Bond at Bond Price of 94% | US$100,000 x 94% = US$94,000 |
| Coupon Payment Received by Client on 31 Dec 2017 | US$100,000 x 5%p.a. = US$5,000 |
| Accrued Interest Received from Buyer | US$100,000 x 5%p.a. x 9 /12 = US$3,750 |
| Total Receivable | US$94,000 + US$5,000 + US$3,750 = US$102,750 |
| Total Return | US$102,750 – US$104,500
= – US$1,750 (Loss) |
|
UNDERLYING ASSET
|
CAPITAL PROTECTION LEVEL
|
INVESTMENT TENOR
|
||
|---|---|---|---|---|
|
& |
|
& |
|
This webpage does not constitute any offer, invitation or recommendation to any person to enter into any transaction described therein or any similar transaction, nor does it constitute any prediction of likely future price movements. Investors should not make investment decisions based on this webpage alone. This webpage has not been reviewed by the Securities and Futures Commission or any regulatory authority in Hong Kong.
