Principal Protected Notes

What are Principal Protected Notes?

A PPN is a combination of a zero-coupon bond and a call option on a particular underlying index (such as the S&P 500) whose expiration matches the PPN. Note that a PPN is not an equity but a debt instrument. At maturity, the holder gets the principal back, and any increase in net value. If there is a decrease in net value, the holder only gets the principal back. No dividends or interest payments are generated through the life of the PPN.

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