Which of the following does not fall under CDIC coverage?

Which of the following does not fall under CDIC coverage?

• A. Bond funds
• B. Principle Protected Notes
• C. Money market funds
• D. Equity funds

Answer: (B)

The correct response is based on understanding the nature and coverage of the Canada Deposit Insurance Corporation (CDIC). CDIC insurance primarily protects deposits made at member financial institutions, specifically in savings accounts, chequing accounts, and certain guaranteed investment products. Principle Protected Notes (PPNs) are not considered traditional deposits. Instead, they are structured financial products issued by financial institutions that combine a fixed-income component with a potential equity component, meaning they involve market risk. Because the returns on PPNs depend on the performance of underlying assets, they do not qualify for CDIC coverage. This differentiates them from products such as savings accounts and guaranteed deposits, which are insured. In essence, while there are various investment vehicles available to Canadians, CDIC specifically insures savings products, leaving structured notes like PPNs outside the realm of their coverage. Understanding the distinction between insured deposits and investment products is crucial for anyone managing or considering investment options in the financial market.

The correct response is based on understanding the nature and coverage of the Canada Deposit Insurance Corporation (CDIC). CDIC insurance primarily protects deposits made at member financial institutions, specifically in savings accounts, chequing accounts, and certain guaranteed investment products.

Principle Protected Notes (PPNs) are not considered traditional deposits. Instead, they are structured financial products issued by financial institutions that combine a fixed-income component with a potential equity component, meaning they involve market risk. Because the returns on PPNs depend on the performance of underlying assets, they do not qualify for CDIC coverage. This differentiates them from products such as savings accounts and guaranteed deposits, which are insured.

In essence, while there are various investment vehicles available to Canadians, CDIC specifically insures savings products, leaving structured notes like PPNs outside the realm of their coverage. Understanding the distinction between insured deposits and investment products is crucial for anyone managing or considering investment options in the financial market.