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Structured Investments: How do structured investments work?

The following is an example of how an interest rate-linked structured investment works:

An interest rate-linked structured investment means that the returns are usually linked to some interest rates.

There is usually a formula that makes reference to a specific floating interest rate (e.g. the Kuala Lumpur Interbank Offer Rate (KLIBOR)).

The actual returns depend on the interest rate movements.
Investment details:
Your investment: RM100,000 principal protected
Underlying asset: 3-month KLIBOR
Interest payable: Yearly basis if KLIBOR moves within the agreed band (e.g. 3% - 3.75%) during the investment period and nothing if KLIBOR moves outside the agreed band during the investment period.

Total payback upon maturity

Scenario 1:
If KLIBOR moves WITHIN the agreed band during the investment period, you will receive a positive return on your investment.

Investment - KLIBOR moves within agreed band

Scenario 2:
If KLIBOR moves OUTSIDE the agreed band during the investment period, there will be no investment return for you.

Investment - KLIBOR moves outside agreed band

Early withdrawal


If you withdraw the investment before it matures, you will receive a sum less than your initial investment.

Investment Early Withdrawal


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Reprinted with permission from BankingInfo (A Consumer Education Programme by Bank Negara Malaysia)


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Knowledge Base ID :   1456
Last Reviewed :   May 22, 2014
Source :   BankingInfo
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