The protected bonus bond from Pinnacle Insurance is a single premium bond that is designed for investors who usually opt for building society accounts.
The bond is linked to the performance of the Nasdaq 100 index over a five-year term through the Pinnacle protected bonus bond fund.
Investors will get their original capital return plus up to 20 per cent of the growth in the Nasdaq 100 during the five year term. The level of the index is measured at the beginning and end of each year to calculate whether it has risen or fallen. If the index rises in any one year, the investor will not get the full benefit as the return is restricted to a maximum of 18 per cent. But if the index falls, the investor will experience the full effect of this.
At the end of the investment term, the returns for each year are added together to calculate the total return. However, the amount the investor will get is limited to a maximum of 20 per cent. The protected bonus bond is unlikely to attract interest from experienced stockmarket investors, but is likely to appeal to cautious investors who feel it would be an added bonus if technology recovers from its recent downturn.
The Nasdaq 100 index rose from 576.230 points on December 29, 1995 to 2341.700 points on December 29, 2000.