Investments, tenth edition

 Figure 20.14 

Return on index-linked CD  

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P A R T   V I

  Options, Futures, and Other Derivatives

rate of return on a market index such as the S&P 500, while guaranteeing a minimum rate 

of return should the market fall. For example, the index-linked CD may offer 70% of any 

market increase, but protect its holder from any market decrease by guaranteeing at least 

no loss. 

 The index-linked CD is clearly a type of call option. If the market rises, the depositor 

profits according to the