Range Accrual Note

Structured product where the coupon is linked to the performance of a reference index, for example, the six-month USD LIBOR. The return from the note will be higher than that from traditional fixed-rate deposits if the spot six-month USD LIBOR moves within a pre-determined range during the life of the note. Each coupon depends on the number of days in the coupon period that the spot six-month USD LIBOR fixes within the pre-determined range. Interest is accrued at an above-market rate on each day that the underlying rate fixes within the range, and no interest is accrued on each day that the underlying rate fixes outside the range. If an investor correctly predicts that interest rates will not rise as far or as fast as the market predicts, then the investor can realize an enhanced return by investing in a range accrual note. This instrument is also called an accretion bond index range note; corridor bond or note; range floater; accrual note; LIBOR range note; range accumulation note; or a fairway bond.