Question
On June 6, 2023, you sold a structured product that has the following features: The maturity date will be 7 years later, on June 6,
On June 6, 2023, you sold a structured product that has the following features: The maturity date will be 7 years later, on June 6, 2030, with a principal amount of $10 and no interest rate, and an issue price of $10. The product also provides full protection on the principal amount (100%). At maturity, the payoff will be the principal amount plus any positive Supplemental Redemption Amount (SRA).
Index is NASDAQ Composite Index (COMP) normalized to have Initial Index Value = $10
Since Index rate is not available yet(be careful with the time setting), it should be predicted rationally.
Tasks:
Decompose/Break down the structured product's payoff into its components and Plot the structured product's payoff on a graph.
- SRA=$10116%InitialIndexValueFinalIndexValueInitialIndexValueStep by Step Solution
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