This investment pays investors a fixed interest with the possibility that at maturity, investors will receive back the original sum invested plus interest in a different currency. At the time of Investment, the Investor will know the amount that will be received at maturity in the Base Currency and in the Linked Currency. What is not known is in which of these two currencies the Investor will be repaid.
The Tenor of this investment can be for a period of 1 week, 2 weeks, 1 month, 2 months or 3 months. It may vary from bank to bank, country to country.
You have to select 2 currencies; Base Currency and Linked Currency. The “live” system in the bank will show a range of 10 different sets of conversion rates against the investment return (% of interest to be paid). The price is only valid for 35 seconds; meaning that you will have to click the category you choose before the 35-second is up otherwise the rates will change upon the next refresh.
A Current Spot Rate will be fixed usually higher than the list of 10 set of rates given you to select. You will have a choice of selecting the rate you want to convert and your investment return will depends on the set of conversion rate and interest percentage you chose.
Warning: If at maturity the Redemption is paid by the Bank in the Linked Currency and the Investor intends to convert this sum back into the Base Currency, this conversion will have to be made at the then-prevailing exchange rate, which may be less favourable than the Conversion Rate which the Bank converted the Redemption into the Linked Currency.
After conversion back into the Base Currency, the overall return may also be less than the Investment Return. In some circumstances, the Investor could even receive less than the original Investment Amount. This simply means that the Investment is ultimately not principal protected!