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Northern Rock offers double helping

Northern Rock has introduced the second issue of fifty-fifty, a combination bond that is split equally between high interest account and a guaranteed equity bond.

The high interest account element is a two-year fixed rate bond paying 6.5 per cent gross a year until December 1, 2003, which is 0.5 per cent lower than the previous issue of the product because of the latest cut in the Bank of England base rate. Withdrawals are allowed during the fixed-rate period, but they are subject to the loss of 90 days&#39 interest as a penalty.

The guaranteed equity bond element tracks the FTSE 100 index over a five-year term and investors will receive 70 per cent of any growth in the FTSE 100 index. The return of the original capital is guaranteed regardless of stockmarket performance during the term.

To calculate the return, the level of the index is taken on December 20, 2001 and this Is measured against the final level. This is produced from the average closing value of the index between December 21, 2005 and December 20, 2006.

Bristol & West&#39s balanced guaranteed equity bond is a similar product that offers a higher rate of interest at 7 per cent gross on its high interest account element. However, this has a one-year term so interest will revert to a variable rate sooner than the Northern Rock product. Some people may prefer Northern Rock because of the extra year&#39s stability it offers.

However, Bristol & West locks investors into the guaranteed equity bond element for six years and tracks the Eurostoxx 50 and Nikkei 225 in addition to the FTSE 100. A higher percentage of growth at 80 per cent may be attractive, but this is an average of all three. Its returns could be brought down or boosted by this diversity, depending on how each index performs.

According to FTSE, the FTSE 100 index rose from 3926.079 points on November 13, 1996 to 5277.070 points on November 13, 2001.

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