Structural Deposit Pegged to Exchange Rates

Based on your understanding of fluctuations in the exchange rate of a certain currency, as well as your will to shoulder a certain risk of loss in interest, you sign a structural deposit contract with the China Merchants Bank. Through option combinations, you try your best to achieve earnings that are higher than fixed deposit interest.

Case: Structural Deposit Pegged to Exchange Rates

·	Provided that: Company A signed a structural deposit contract with the China Merchants Bank on August 10, 2002 as follows: 
·	Deposit Period: three months (August 10, 2002 to November 10, 2002)
·	Range of Exchange Rate Fluctuation: benchmark of RMB to USD 8.2600-8.2800
·	Contracted Interest Rate: Annual rate of 2.4 percent or 0.1 percent (i.e. in case the benchmark of RMB to USD on November 10, 2002 ranges within 8.2600-8.2800, the China Merchants Bank pays interest to Company A by an annual rate of 2.4 percent; in case the benchmark of RMB to USD on November 10, 2002 ranges beyond 8.2600-8.2800, the China Merchants Bank pays interest to Company A by an annual rate of 0.1 percent)
·	On November 10, 2002, benchmark of RMB to USD stood at 8.2771, so the China Merchants Bank pays interest to Company A by an annual rate of 2.4 percent. In this case, Company A achieved an earning rate that is 1.2375 percentage points higher than the fixed deposit interest rate.
·	In addition, the China Merchants Bank is also capable of providing structural deposit products that allow you to choose any exchange rates. For example, earning rate, exchange rate fluctuation range, or type of currency, etc.

Structural Deposit Pegged to Interest Rates
Pegged to LIBOR or HIBOR, this product is a relatively long-term management based on one' s expectation of short-time trend in interest rate fluctuations

Case: 

·	Period: 3 years
·	Interest Rates: a fixed rate of 4.5 percent for the first year, while for the rest two years, the rate will be (10 percent minus 6-month LIBOR), interest payable in every 6 months; after the first interest payment, the bank may invoke in every 6 moth its right to terminate the deposit.
·	Advantage: Absolutely no loss to principal, with possibility to achieve earning rates higher than market interest rate.
·	Risk: hike in market interest rate.

Structural Deposit Pegged to Other Objects

·	For instance, deposit interest rate can be pegged to international gold price, North Sea Oil Price of the UK, or even weather conditions in certain areas.
·	Advantage: Absolutely no loss to principal, with possibility to achieve earning rates higher than market interest rate.
·	Risk: You must have very profound understanding on the trend of fluctuation of the objects pegged to. Misjudgment will lead to much lower earning rate.