CMFAS CM-SIP Structured Products & Structured Notes question: a STRUCTURED DEPOSIT

CMFAS CM-SIPStructured Products & Structured Notes

Which statement about a STRUCTURED DEPOSIT is MOST accurate?

A It is an ordinary savings deposit that pays a fixed rate of interest, with deposit insurance
B It makes the investor a part-owner of the underlying asset, entitled to its income and voting rights
C It is a debt security, not a deposit, so the investor ranks as an unsecured bondholder of the bank
D It is a bank deposit liability, but being market-linked it generally lacks deposit-insurance cover

Show the answer and explanation

Answer: D. It is a bank deposit liability, but being market-linked it generally lacks deposit-insurance cover

A structured deposit is still a deposit liability of the bank, but its market-linked return means it is not an ordinary savings deposit and generally does not enjoy the deposit insurance that covers conventional deposits.

Common mistake

Assuming a structured deposit is covered like an ordinary savings deposit.

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CMFAS CM-SIP Structured Products & Structured Notes question: a STRUCTURED DEPOSIT

Answer: D. It is a bank deposit liability, but being market-linked it generally lacks deposit-insurance cover

Common mistake

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CMFAS CM-SIP Structured Products & Structured Notes question: a STRUCTURED DEPOSIT

Answer: D. It is a bank deposit liability, but being market-linked it generally lacks deposit-insurance cover

Common mistake

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