Birmingham Midshires has unveiled the fifth issue of its guaranteed five-year trigger account, which is linked to the FTSE 100 index for five years.
This guaranteed equity bond is available to investors with at least £1,000 to invest and guarantees the return of the original capital whatever happens to the index. It also provides a fixed level of capital growth at 42 per cent gross, which will be payable if the FTSE 100 index stays the same or rises during the term.
To calculate the returns, the daily closing level of the FTSE 100 index is recorded between October 14, 2002 and January 14, 2002 and an average is produced to form the initial index level. This figure is then compared with the maturity level, which is based on the average daily closing levels of the index during the final year.
Many guaranteed equity bonds are linked to the FTSE 100 index for five years, so this bond is nothing out of the ordinary in this respect. However, the level of capital growth is fixed at 42 per cent, whereas some bonds such as National Savings and Investments guaranteed equity bond offer a percentage of growth in the index.
The National savings and Investments products maximum growth potential of 70 per cent is higher than the return of the Birmingham Midshires product. However, the Birmingham Midshires return is fixed, so investors would get 42 per cent even if the index rose by 20 per cent. A 20 per cent rise in the index would produce a 20 per cent return with the National Savings and Investments product.