Yield Magnet Notes: Example of Coupon Calculations
For purposes of this example, assume a fiveyear Yield Magnet
Note with annual coupon periods, a fixed coupon payment of 5.25%
for the first year, variable coupon payments in years two through
five, an upper boundary of 8.00% and a lower boundary of 12.50%.*
Given these assumptions, the variable coupon payment will never
be more than 8.00% or less than 0% in any variable coupon period.
In years two through five, the variable coupon will be determined
on each annual valuation date.
[ Chart; Fixed and Variable Coupons ]
The variable coupon will be calculated by averaging the performance
of the individual stocks in the underlying portfolio on each valuation
date relative to their individual closing prices on the day the
notes are priced. No stock may contribute more than an 8.00% positive
return or a 12.50% negative return to the average return across
the underlying portfolio.
Magnet Features at Work
If an individual stock has an 8.00% positive return on any annual
valuation date, the performance for such stock on each subsequent
valuation date will be ‘locked in’ at 8.00% for each
subsequent year when a variable coupon payment is calculated.
Also, starting in year three, the annual variable coupon payment
will be no lower than the prior year’s variable coupon payment.
* These assumptions are for illustrative purposes only. The actual
notes offered may have different terms. You should review the
prospectus for the particular offering for a description of the
actual terms of any notes.
