CPI - Capped and Floored Floater Deposit

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CPI - Capped and Floored Floater Deposit

Structured Investment Deposit is a complex product and investors should exercise caution in relation to the product. This is a structured investment product involving derivatives. The investment decision is yours but you should not invest in Structured Investment Deposit unless the intermediary who sells it to you has explained to you that the product is suitable for you having regard to your financial situation, investment experience and investment objectives.
Investors should not make investment decision based on this marketing material alone.
Investment involves risk and past performance is not indicative of future performance.
The price of structured products may move up or down. Losses may be incurred as well as profits made as a result of buying and selling structured products.
This is a structured investment product, which is NOT a protected deposit and is NOT protected by the Deposit Protection Scheme in Hong Kong.

View detailed risk disclosure. Please also refer to the offering documents for further details including risk factors.

Invest CPI - Capped & Floored Floater Deposit

Capital protected investment that offers Periodic interest payment equivalent to the Interest Rate Reference Index, subject to a floor and cap

Features and benefits

If you are looking for:

Simple and less risky investment
100% protection of your capital at maturity while you do not mind to lock up your structured investment deposit for a certain period (e.g. from 2 to 3 years). However, if the Bank becomes insolvent or default on its obligations under this product, you could suffer a total loss of your deposit amount. Please refer to 'Credit risk of the Bank' under Risk for details
Periodic interest payment linked to an interest rate reference index e.g. HIBOR

Capital Protected Investment Deposit - Capped & Floored Floater Deposit may be your choice.

Product risk level: Low

Minimal chance of losing a significant portion of your capital over the term of the investment (although this is not guaranteed). Expected to demonstrate minimal price fluctuations over short periods of time.

Trade now

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Need help?

Call (852) 2233 3733

Risk Profiling Questionnaire

Why consider/ Why not consider [PDF]

Why Capped & Floored Floater Deposit?

Satisfy your needs

Meet your foreign currency needs such as paying children’s tuition fees, buying a home aboard, or meet your future retirement needs

Capture wealth growth

Offer yield enhancement opportunity to increase your interest

Enhanced potential returns

Offer minimum interest at the interest floor and provide higher potential returns based on the performance of the Interest Rate Reference Index

How to invest/get started with HSBC

How does Capped & Floored Floater Deposit work?

Click here to view different payoff scenarios

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Manage your investments online with HSBC

Set up Structured Investment Deposits through HSBC personal Internet Banking

24-hour round-the-clock online service to stay up to date with foreign currency market
Real time market data

How much does it cost?

In general, there are no additional charges on investing Structured Products, all operational, administrative and hedging costs, etc have already been contained and subsumed within the calculation of the return and/or other variables of the Product.

Risk disclosure

Not a time deposit - Capped & Floored Floater Deposit is NOT equivalent to, nor should it be treated as a substitute for, time deposit. It is NOT a protected deposit and is NOT protected by the Deposit Protection Scheme in Hong Kong.
Derivatives risk - Capped & Floored Floater Deposit is embedded with interest rate option(s). Option transactions involve risks. If the Interest Rate Reference Index increases above the cap, the Interest Cap will limit the upside potential of interest return.
Limited potential gain - The maximum potential gain is limited to the interest on the deposit calculated based on the Interest Cap.
Principal protection at maturity only - The principal protection feature is only applicable if this product is held to maturity. If you redeem the deposit before maturity, you may receive an amount significantly less than the initial investment, even if the level of the linked interest rate has moved in a favourable direction, as the Bank will incur cost in obtaining the funds in the money market for the remainder of the deposit period.
Market risk - The interest return of a Capped & Floored Floater Deposit will depend upon the Interest Rate Reference Index on the relevant Valuation Dates during the relevant deposit period. Interest rate movements can be unexpected, sudden and drastic, and can be affected by complex political and economic factors. The Interest Cap may limit the upside potential of interest return, should the Interest Rate Reference Index increase to above the Interest Cap. You must be prepared to take the risk of earning a very low return on the money invested.
Liquidity risk - Capped & Floored Floater Deposit is designed to be held until maturity. You should not use it as a short term investment vehicle. Early redemption is only offered twice a month after the initial 6 months. Apart from this, under special circumstances, the Bank has the right to accept your ad-hoc early redemption request at its sole discretion and on a case by case basis. The Bank will provide an indication of the redemption price upon such request. Your return upon such early redemption will likely be lower than that if the deposit were held until maturity and may be negative.
Reinvestment risk - If you redeem the deposit before maturity, you must be prepared to risk the interest that might otherwise have been earned if the deposit is not early redeemed. Also, you may not be able to enjoy the same rate of return if you re-invest in other investments with similar risk parameters.
Credit risk of the Bank - Capped & Floored Floater Deposit is not secured by any collateral. When you invest in this product, you will be relying on the Bank's creditworthiness. If the Bank becomes insolvent or defaults on its obligations under this product, you can only claim as an unsecured creditor of the Bank. In the worst case, you could suffer a total loss of your deposit amount.
Currency risk - If the deposit currency is not your home currency, and you choose to convert it back to your home currency upon maturity, you may make a gain or loss due to exchange rate fluctuations.
Risk of early termination by the Bank - The Bank shall have the discretion to uplift a Deposit or any part thereof prior to the Maturity Date (subject to the deduction of such break costs or the addition of such proportion of the return or redemption amount, which may result in a figure less than the original principal amount of the Deposit) if it determines, in its sole discretion, that this is necessary or appropriate to protect any right of the Bank to combine accounts or set-off, or any security interest, or to protect the Customer's interests.

Example of CPI- CFFD
Customer View	US Dollar 3-month LIBOR will stay within the range of 0.85% p.a.- 1.50% p.a. in the coming 3 years
Deposit currency	US Dollar (USD)
Deposit Period	3 years
Deposit Amount	USD10,000
Interest Rate Reference Index	USD Dollar 3-month LIBOR (3M LIBOR)
Interest Floor	0.85% p.a.
Interest Cap	1.50% p.a.
Interest rate	Equals to US dollar three-month LIBOR subject to a minimum of 0.85% p.a. and a maximum of 1.50% p.a.
Interest period	Quarterly
Interest payment for each period	(Principal x Interest rate / 4) for each interest period
Upon maturity, customer receives	100% of principal

Scenario 1: Best case scenario

US dollar three-month LIBOR is at or above the Interest Cap throughout the interest tenor.
Year	Quarterly Interest period	USD 3-month LIBOR Valuation Date	USD 3-month LIBOR (p.a.)	Interest rate for the period (p.a.)	Interest earned for the period
1	1	2 London Business Day prior to the Deposit Date	1.50%	1.50% (Interest Cap)	1.50% ÷ 4 = 0.375%
1	2	2 London Business Day prior to the Deposit Date	1.60%	1.50% (Interest Cap)	1.50% ÷ 4 = 0.375%
1	3	2 London Business Day prior to the Deposit Date	1.70%	1.50% (Interest Cap)	1.50% ÷ 4 = 0.375%
1	4	2 London Business Day prior to the Deposit Date	1.80%	1.50% (Interest Cap)	1.50% ÷ 4 = 0.375%
2	5	2 London Business Day prior to the Deposit Date	1.90%	1.50% (Interest Cap)	1.50% ÷ 4 = 0.375%
2	6	2 London Business Day prior to the Deposit Date	1.95%	1.50% (Interest Cap)	1.50% ÷ 4 = 0.375%
2	7	2 London Business Day prior to the Deposit Date	2.00%	1.50% (Interest Cap)	1.50% ÷ 4 = 0.375%
2	8	2 London Business Day prior to the Deposit Date	2.05%	1.50% (Interest Cap)	1.50% ÷ 4 = 0.375%
2	9	2 London Business Day prior to the Deposit Date	2.05%	1.50% (Interest Cap)	1.50% ÷ 4 = 0.375%
2	10	2 London Business Day prior to the Deposit Date	2.05%	1.50% (Interest Cap)	1.50% ÷ 4 = 0.375%
2	11	2 London Business Day prior to the Deposit Date	2.10%	1.50% (Interest Cap)	1.50% ÷ 4 = 0.375%
2	12	2 London Business Day prior to the Deposit Date	2.15%	1.50% (Interest Cap)	1.50% ÷ 4 = 0.375%

Total interest earned for the 3-year period is 4.50%. Effective interest rate is 1.50% p.a.. Investor receives 100% of principal at maturity.

Scenario 2: Middle-of-the-road scenario

US dollar three-month LIBOR stays below the Interest Floor in the first 6 quarters, then it moderately moves up starting the 7th quarter.
Year	Quarterly Interest period	USD 3-month LIBOR Valuation Date	USD 3-month LIBOR (p.a.)	Interest rate for the period (p.a.)	Interest earned for the period
1	1	2 London Business Day prior to the Deposit Date	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
1	2	2 London Business Day prior to the first date of the interest period	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
1	3	2 London Business Day prior to the first date of the interest period	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
1	4	2 London Business Day prior to the first date of the interest period	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
2	5	2 London Business Day prior to the first date of the interest period	0.80%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
2	6	2 London Business Day prior to the first date of the interest period	0.80%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
2	7	2 London Business Day prior to the first date of the interest period	1.20%	1.20%	1.20% ÷ 4 = 0.3000%
2	8	2 London Business Day prior to the first date of the interest period	1.25%	1.25%	1.25% ÷ 4 = 0.3125%
3	9	2 London Business Day prior to the first date of the interest period	1.30%	1.30%	1.30% ÷ 4 = 0.3250%
3	10	2 London Business Day prior to the first date of the interest period	1.50%	1.50% (Interest Cap)	1.50% ÷ 4 = 0.375%
3	11	2 London Business Day prior to the first date of the interest period	1.60%	1.50% (Interest Cap)	1.50% ÷ 4 = 0.375%
3	12	2 London Business Day prior to the first date of the interest period	1.70%	1.50% (Interest Cap)	1.50% ÷ 4 = 0.375%

Total interest earned for the 3-year period is 3.3375%. Effective interest rate is 1.1125% p.a.. Investor receives 100% of principal at maturity.

Scenario 3: Middle-of-the-road scenario

US dollar three-month LIBOR stays below the Interest Floor throughout the deposit period.
Year	Quarterly Interest period	USD 3-month LIBOR Valuation Date	USD 3-month LIBOR (p.a.)	Interest rate for the period (p.a.)	Interest earned for the period
1	1	2 London Business Day prior to the Deposit Date	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
1	2	2 London Business Day prior to the first date of the interest period	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
1	3	2 London Business Day prior to the first date of the interest period	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
1	4	2 London Business Day prior to the first date of the interest period	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
2	5	2 London Business Day prior to the first date of the interest period	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
2	6	2 London Business Day prior to the first date of the interest period	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
2	7	2 London Business Day prior to the first date of the interest period	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
2	8	2 London Business Day prior to the first date of the interest period	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
3	9	2 London Business Day prior to the first date of the interest period	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
3	10	2 London Business Day prior to the first date of the interest period	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
3	11	2 London Business Day prior to the first date of the interest period	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
3	12	2 London Business Day prior to the first date of the interest period	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%

Total interest earned for the 3-year period is 2.55%. Effective interest rate is 0.85% p.a.. Investor receives 100% of principal at maturity.

Scenario 4: Worst case scenario

US dollar three-month LIBOR stays below the Interest Floor in the first 6 months, Customer redeems the deposit after the 2nd quarter.
Year	Quarterly Interest period	USD 3-month LIBOR Valuation Date	USD 3-month LIBOR (p.a.)	Interest rate for the period (p.a.)	Interest earned for the period
1	1	2 London Business Day prior to the Deposit Date	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
1	2	2 London Business Day prior to the first date of the interest period	0.50%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%

Total interest earned for the 6-month period is 0.425%. Effective interest rate is 0.85% p.a.

Since investor redeems the deposit before its maturity, investor may receive less than 100% of his or her initial deposit amount. In the worst case scenario, investor may incur significant loss from the investment.

Scenario 5: Converting USD into your home currency after a year

Assume US dollar three-month LIBOR stays below the Interest Floor throughout the deposit period and you redeem the deposit at initial deposit amount after a year, which mean that interest floor (0.85% p.a.) is applied on all 4 quarterly interest payments before redemption. Also, assume the initial spot for USD/HKD on Trade Date was 7.7901 and USD/HKD depreciated by 1% resulting USD/HKD trading at 7.7122 after a year, and you choose to convert your maturity amount in USD back to HKD as your home currency.

In this scenario, the potential loss from the product could offset (or even exceed) the potential gain if deposit currency (i.e. USD) depreciates against your home currency (i.e. HKD):

Principal Amount in HKD at Redemption Date - Principal Amount in HKD on Trade Date

= (USD10,000*100.85%)*7.7122 - USD10,000*7.7901

= - HKD123 equivalent to a loss of 0.16% of the Principal Amount in HKD

Scenario 6: The Bank becomes insolvent or defaults on its obligations

Assuming that the Bank becomes insolvent during the tenor of this product or defaults on its obligations under this product, you can only claim as its unsecured creditor. You may get nothing back and suffer a total loss of your deposit amount.

As a reference, if a sum of USD10,000 is placed in a conventional 3-year US dollar time deposit on 23 May 2011, the interest rate is 0.45% p.a.

If investor redeems the product before its maturity, investor may receive less than 100% of initial investment amount. In the worst case scenario, investor may incur significant loss.

Graphic presentation

Scenario Analysis Disclaimer

The above scenarios are provided for illustrative purposes only, and do not reflect a complete analysis of all possible gain and loss scenarios that may arise during any actual investment. No representation or warranty is made by the Bank that any scenario described above can be duplicated under real investment conditions. Actual results may vary from the results shown above, and variations may be material.

Risk disclosure

Not a time deposit - Capped & Floored Floater Deposit is NOT equivalent to, nor should it be treated as a substitute for, time deposit. It is NOT a protected deposit and is NOT protected by the Deposit Protection Scheme in Hong Kong.
Derivatives risk - Capped & Floored Floater Deposit is embedded with interest rate option(s). Option transactions involve risks. If the Interest Rate Reference Index increases above the cap, the Interest Cap will limit the upside potential of interest return.
Limited potential gain - The maximum potential gain is limited to the interest on the deposit calculated based on the Interest Cap.
Principal protection at maturity only - The principal protection feature is only applicable if this product is held to maturity. If you redeem the deposit before maturity, you may receive an amount significantly less than the initial investment, even if the level of the linked interest rate has moved in a favourable direction, as the Bank will incur cost in obtaining the funds in the money market for the remainder of the deposit period.
Market risk - The interest return of a Capped & Floored Floater Deposit will depend upon the Interest Rate Reference Index on the relevant Valuation Dates during the relevant deposit period. Interest rate movements can be unexpected, sudden and drastic, and can be affected by complex political and economic factors. The Interest Cap may limit the upside potential of interest return, should the Interest Rate Reference Index increase to above the Interest Cap. You must be prepared to take the risk of earning a very low return on the money invested.
Liquidity risk - Capped & Floored Floater Deposit is designed to be held until maturity. You should not use it as a short term investment vehicle. Early redemption is only offered twice a month after the initial 6 months. Apart from this, under special circumstances, the Bank has the right to accept your ad-hoc early redemption request at its sole discretion and on a case by case basis. The Bank will provide an indication of the redemption price upon such request. Your return upon such early redemption will likely be lower than that if the deposit were held until maturity and may be negative.
Reinvestment risk - If you redeem the deposit before maturity, you must be prepared to risk the interest that might otherwise have been earned if the deposit is not early redeemed. Also, you may not be able to enjoy the same rate of return if you re-invest in other investments with similar risk parameters.
Credit risk of the Bank - Capped & Floored Floater Deposit is not secured by any collateral. When you invest in this product, you will be relying on the Bank's creditworthiness. If the Bank becomes insolvent or defaults on its obligations under this product, you can only claim as an unsecured creditor of the Bank. In the worst case, you could suffer a total loss of your deposit amount.
Currency risk - If the deposit currency is not your home currency, and you choose to convert it back to your home currency upon maturity, you may make a gain or loss due to exchange rate fluctuations.
Risk of early termination by the Bank - The Bank shall have the discretion to uplift a Deposit or any part thereof prior to the Maturity Date (subject to the deduction of such break costs or the addition of such proportion of the return or redemption amount, which may result in a figure less than the original principal amount of the Deposit) if it determines, in its sole discretion, that this is necessary or appropriate to protect any right of the Bank to combine accounts or set-off, or any security interest, or to protect the Customer's interests.

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Please note that Structured Investment Deposit is not available for persons who are US citizen / with US nationality, are US resident or US tax payer, or have a US address (e.g. primary mailing, residence or business address in the US).

Example of CPI- CFFD
Customer View	US Dollar 3-month LIBOR will stay within the range of 0.85% p.a.- 1.50% p.a. in the coming 3 years
Deposit currency	US Dollar (USD)
Deposit Period	3 years
Deposit Amount	USD10,000
Interest Rate Reference Index	USD Dollar 3-month LIBOR (3M LIBOR)
Interest Floor	0.85% p.a.
Interest Cap	1.50% p.a.
Interest rate	Equals to US dollar three-month LIBOR subject to a minimum of 0.85% p.a. and a maximum of 1.50% p.a.
Interest period	Quarterly
Interest payment for each period	(Principal x Interest rate / 4) for each interest period
Upon maturity, customer receives	100% of principal

Scenario 1: Best case scenario

US dollar three-month LIBOR is at or above the Interest Cap throughout the interest tenor.
Year	Quarterly Interest period	USD 3-month LIBOR Valuation Date	USD 3-month LIBOR (p.a.)	Interest rate for the period (p.a.)	Interest earned for the period
1	1	2 London Business Day prior to the Deposit Date	1.50%	1.50% (Interest Cap)	1.50% ÷ 4 = 0.375%
1	2	2 London Business Day prior to the Deposit Date	1.60%	1.50% (Interest Cap)	1.50% ÷ 4 = 0.375%
1	3	2 London Business Day prior to the Deposit Date	1.70%	1.50% (Interest Cap)	1.50% ÷ 4 = 0.375%
1	4	2 London Business Day prior to the Deposit Date	1.80%	1.50% (Interest Cap)	1.50% ÷ 4 = 0.375%
2	5	2 London Business Day prior to the Deposit Date	1.90%	1.50% (Interest Cap)	1.50% ÷ 4 = 0.375%
2	6	2 London Business Day prior to the Deposit Date	1.95%	1.50% (Interest Cap)	1.50% ÷ 4 = 0.375%
2	7	2 London Business Day prior to the Deposit Date	2.00%	1.50% (Interest Cap)	1.50% ÷ 4 = 0.375%
2	8	2 London Business Day prior to the Deposit Date	2.05%	1.50% (Interest Cap)	1.50% ÷ 4 = 0.375%
2	9	2 London Business Day prior to the Deposit Date	2.05%	1.50% (Interest Cap)	1.50% ÷ 4 = 0.375%
2	10	2 London Business Day prior to the Deposit Date	2.05%	1.50% (Interest Cap)	1.50% ÷ 4 = 0.375%
2	11	2 London Business Day prior to the Deposit Date	2.10%	1.50% (Interest Cap)	1.50% ÷ 4 = 0.375%
2	12	2 London Business Day prior to the Deposit Date	2.15%	1.50% (Interest Cap)	1.50% ÷ 4 = 0.375%

Total interest earned for the 3-year period is 4.50%. Effective interest rate is 1.50% p.a.. Investor receives 100% of principal at maturity.

Scenario 2: Middle-of-the-road scenario

US dollar three-month LIBOR stays below the Interest Floor in the first 6 quarters, then it moderately moves up starting the 7th quarter.
Year	Quarterly Interest period	USD 3-month LIBOR Valuation Date	USD 3-month LIBOR (p.a.)	Interest rate for the period (p.a.)	Interest earned for the period
1	1	2 London Business Day prior to the Deposit Date	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
1	2	2 London Business Day prior to the first date of the interest period	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
1	3	2 London Business Day prior to the first date of the interest period	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
1	4	2 London Business Day prior to the first date of the interest period	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
2	5	2 London Business Day prior to the first date of the interest period	0.80%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
2	6	2 London Business Day prior to the first date of the interest period	0.80%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
2	7	2 London Business Day prior to the first date of the interest period	1.20%	1.20%	1.20% ÷ 4 = 0.3000%
2	8	2 London Business Day prior to the first date of the interest period	1.25%	1.25%	1.25% ÷ 4 = 0.3125%
3	9	2 London Business Day prior to the first date of the interest period	1.30%	1.30%	1.30% ÷ 4 = 0.3250%
3	10	2 London Business Day prior to the first date of the interest period	1.50%	1.50% (Interest Cap)	1.50% ÷ 4 = 0.375%
3	11	2 London Business Day prior to the first date of the interest period	1.60%	1.50% (Interest Cap)	1.50% ÷ 4 = 0.375%
3	12	2 London Business Day prior to the first date of the interest period	1.70%	1.50% (Interest Cap)	1.50% ÷ 4 = 0.375%

Total interest earned for the 3-year period is 3.3375%. Effective interest rate is 1.1125% p.a.. Investor receives 100% of principal at maturity.

Scenario 3: Middle-of-the-road scenario

US dollar three-month LIBOR stays below the Interest Floor throughout the deposit period.
Year	Quarterly Interest period	USD 3-month LIBOR Valuation Date	USD 3-month LIBOR (p.a.)	Interest rate for the period (p.a.)	Interest earned for the period
1	1	2 London Business Day prior to the Deposit Date	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
1	2	2 London Business Day prior to the first date of the interest period	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
1	3	2 London Business Day prior to the first date of the interest period	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
1	4	2 London Business Day prior to the first date of the interest period	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
2	5	2 London Business Day prior to the first date of the interest period	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
2	6	2 London Business Day prior to the first date of the interest period	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
2	7	2 London Business Day prior to the first date of the interest period	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
2	8	2 London Business Day prior to the first date of the interest period	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
3	9	2 London Business Day prior to the first date of the interest period	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
3	10	2 London Business Day prior to the first date of the interest period	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
3	11	2 London Business Day prior to the first date of the interest period	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
3	12	2 London Business Day prior to the first date of the interest period	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%

Total interest earned for the 3-year period is 2.55%. Effective interest rate is 0.85% p.a.. Investor receives 100% of principal at maturity.

Scenario 4: Worst case scenario

US dollar three-month LIBOR stays below the Interest Floor in the first 6 months, Customer redeems the deposit after the 2nd quarter.
Year	Quarterly Interest period	USD 3-month LIBOR Valuation Date	USD 3-month LIBOR (p.a.)	Interest rate for the period (p.a.)	Interest earned for the period
1	1	2 London Business Day prior to the Deposit Date	0.30%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%
1	2	2 London Business Day prior to the first date of the interest period	0.50%	0.85% (Interest Floor)	0.85% / 4 = 0.2125%

Total interest earned for the 6-month period is 0.425%. Effective interest rate is 0.85% p.a.

Scenario 5: Converting USD into your home currency after a year

In this scenario, the potential loss from the product could offset (or even exceed) the potential gain if deposit currency (i.e. USD) depreciates against your home currency (i.e. HKD):

Principal Amount in HKD at Redemption Date - Principal Amount in HKD on Trade Date

= (USD10,000*100.85%)*7.7122 - USD10,000*7.7901

= - HKD123 equivalent to a loss of 0.16% of the Principal Amount in HKD

Scenario 6: The Bank becomes insolvent or defaults on its obligations

As a reference, if a sum of USD10,000 is placed in a conventional 3-year US dollar time deposit on 23 May 2011, the interest rate is 0.45% p.a.

If investor redeems the product before its maturity, investor may receive less than 100% of initial investment amount. In the worst case scenario, investor may incur significant loss.

Graphic presentation

Scenario Analysis Disclaimer

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CPI - Capped and Floored Floater Deposit

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