What term is used to describe the minimum guaranteed return on an investment in a Structured Retail Product?

• A. Participation rate
• B. Capital guarantee
• C. Base return
• D. Investment assurance

Answer: (B)

The term that describes the minimum guaranteed return on an investment in a Structured Retail Product is "capital guarantee." This concept refers to the assurance provided to investors that they will at least receive back their initial investment amount, regardless of the performance of the underlying assets or index. Capital guarantees are particularly attractive to investors who seek to limit their downside risk while still participating in potential upside returns.

In the context of Structured Retail Products, the capital guarantee ensures that while the investment may be linked to variable market performance, investors can feel secure knowing their principal is protected. This is important for cautious investors who may be averse to losing their initial investment in volatile market conditions.

Other terms mentioned, like participation rate, refer instead to the proportion of a market increase that the investor can benefit from, while base return generally relates to the foundational return provided without considering further conditions. Investment assurance, while similar in intent, does not specify the minimum return aspect as clearly as capital guarantee does. Thus, capital guarantee is the precise term indicating the minimum guaranteed return feature of these financial instruments.