Call Risk
Some InterNotes® have call provisions, which means they can be redeemed, or paid off, at the issuer’s discretion prior to maturity, subject to the terms of the InterNotes®. Typically, an issuer will call InterNotes® when interest rates fall, potentially leaving investors unable to reinvest in alternative InterNotes® with similar or better terms.
Credit Risk
As unsecured debt, InterNotes® are subject to the credit risk of the issuer. If the issuer defaults on its obligations, some or all of your coupon payments and principal could be at risk. Additionally, changes to an issuer’s credit rating will generally affect the secondary market value of InterNotes®.
Interest Rate Risk
When interest rates rise, bond prices typically fall; when interest rates decline, bond prices usually rise. Changes in interest rates may reduce or increase the market value of InterNotes®. The longer the maturity of InterNotes®, the greater the impact that changing interest rates can have on their price. If you plan to hold InterNotes® until their maturity, the impact on the market value from changes in interest rates is not a concern.
Liquidity risk
While many broker-dealers maintain an active secondary market that may allow the option to resell InterNotes® at prevailing market rates, there is no assurance that a secondary market will be maintained. If you sell InterNotes® prior to maturity, you may receive more or less than your original investment.
Survivor's Option Limits
InterNotes® issuers that provide Survivor’s Options may choose to limit the aggregate principal amount of InterNotes® that may be redeemed in any one calendar year under the Survivor’s Options terms. There may also be calendar year limits on the exercise of the Survivor’s Option on behalf of any one deceased owner. There may be a holding period before beneficiaries can exercise their Survivor’s Option, and there can be no assurance that exercise of the desired amount will be permitted in any single calendar year. Refer to the offering documents for details, if applicable.
Tax Implications
When held to maturity, InterNotes® incur no capital gain or loss on the original investment. Coupon payments are taxed as ordinary interest income. Tax consequences of InterNotes® features may depend on the particular terms of the InterNotes®. Before purchasing InterNotes®, please consult with your tax advisor. You should also read the applicable tax risk disclosure in the offering documents when considering the purchase of InterNotes®.
InspereX and its affiliates explicitly disclaim any responsibility for product suitability or suitability determinations related to individual investors. This information should not be regarded by recipients as a substitute for the exercise of their own independent judgment, and the information provided herein is not an offer, solicitation or a recommendation to buy, sell, or hold any security or investment strategy. There can be no assurance that the investments shown herein were or will be profitable, and this material does not take into account any investor’s investment objectives, financial situation, particular needs, strategies, tax status or time horizon. Investors must refer to the respective offering documents and pricing supplements for complete and current information relating to Survivor’s Options discussed herein and the specific terms related thereto. This material provides only an overview of particular Survivor’s Options provisions, is subject to change without notice and may not be relied upon for an understanding of the obligations of the issuer or rights of any note holder.
Any financial product sold prior to maturity may be worth more or less than the original amount invested. Depending upon the specific product offering, investment risks include, but are not limited to, interest rate risk, credit risk, call risk and liquidity risk. Additionally, the products discussed herein are not FDIC insured, may lose value, and are not bank guaranteed. Investors should refer to the offering documents for applicable risk considerations.
The information contained herein does not constitute an offer to sell or a solicitation of an offer to buy securities. Investment products described herein may not be offered for sale in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful or prohibited by the specific offering documentation.