What is a bonus certificate?
When you hear about word ‘’bonus’’, the first word that comes to your mind must be benefited. This word means the same in the business world also. If there is more than one benefit in one product, a bogus certificate is issued. When the price of a product increases, the person who has invested in that product gets benefits from it. Due to the surge in the price, he usually receives a considerable amount of money which is known as bonus money. If something unexpected happens, the investor has to pay more money when the maturity period ends.
Bonus certificates usually have a maturity period of 2 to 3 years. As long as the bonus certificate is valid, it guarantees that the investor will get the return unless the subject instrument does not fall below the specific point. This specific point is known as a barrier.
How does a bonus certificate work?
A bonus certificate is issued to the investor in a proper way. First of all, the bonus is set at a particular price, and then it is issued to the investor. After the issuance of the bonus certificate, a barrier is also set. For setting the barrier, the bonus level is always taken into consideration and then the barrier level is set at it.
Whether the investor wants redemption of the money or not at the end of the maturity completely depends on the barrier. There are two situations which usually take place:
- If the asset the investor has invested in does not go low below the barrier level, the investor is paid the money that is equivalent to the bonus level. It is important to remember that the investor must have a bonus certificate in hand.
- If the price of the same asset goes high than the barrier level, it is obvious that the investor will receive a higher amount of payment. In this scenario, the investor gets the maximum amount. Sometimes, the maximum value is also defined in advance. If this is the case, the bonus of the investor will never go beyond this value.
There another scenario that is not so common. Sometimes, the value of the asset goes too low than the barrier. In this situation, the investor will not be able to get any bonus payment. So, when the maturity level ends, the investor gets the money that he invested in the very start.
It is important to note here that the profit and loss of the investor completely depend on whether the asset value will be below the barrier level, equal or higher.
What are the benefits of a bonus certificate?
There are many benefits associated with a bonus certificate. We will talk about a few of them below:
- With a bonus certificate, people have chances of making a lot of money. The best thing about these certificates is that the investor can earn money even when the price of the asset does not move. It means chances for the investor to earn money are very high with the help of a bonus certificate.
- It is very safe for an investor to invest with a bonus certificate. There are very few risks and the safety of the investor is ensured.
- One of the biggest advantages that bonus certificates have over discount certificate is that there is no fixed amount of payout, an investor can expect to have. It completely depends on the properties of the underlying product. if the product is appropriate enough for the investor, he is likely to make more and more profit as there is no limit on the return.
- In a business, risks are inevitable. However, risks associated with bonus certificates are quite less. The investor should invest in the product after having the price and other conditions of the product considered.
Bonus certificate templates can be downloaded from many websites. This certificate includes the information about the investor and the particular asset he has invested in. This certificate keeps guaranteeing the investor that a bonus for him is something he should be sure about. The readymade template saves the time of the user. The template is usually useful for those who issue these certificates.