Scottish Mutual has introduced the 10.net bond, a guaranteed equity bond.
The bond is a high risk product aimed at investors who are looking for income or growth. Investors can opt for annual or monthly income, paying 10 per cent or 0.81 per cent respectively, or can go for a growth option of 131.5 per cent of the original investment instead.
10.net will invest in the Nasdaq 100 index, which is made up mostly of technology companies, but with some exposure to healthcare, communications and consumer goods. Some of these companies include Microsoft, Yahoo, Amazon, Starbucks and Cisco systems.
If the Nasdaq 100 falls by more than 25 per cent of the starting level during its term, and the closing level is lower than the starting level, then the investor will see their capital eroded by one per cent for every one per cent fall in the index. The investor will get their capital back in full if only one of these situations arises.
From January to October 2000 the Nasdaq 100 index has been volatile and has seen large swings, both upward and downward. Although this is a high-risk product, it could see a large amount of growth over a three-year period.
Over a three-year period the Nasdaq 100 index went from 1137.77 on October 10, 1997 to 3168.49 on October 11, 2000.