Deposit Bullets Contract For Free

A Bullet GIC is a type of guaranteed investment contract in which the principal and interest owed is paid in one lump sum. A bullet GIC, or bullet guaranteed investment contract (BGIC), provides investors with a typically low-risk means of achieving a guaranteed principal repayment, plus interest.

For example, say a borrower took out a $200,000 bullet loan with a 15-year repayment term that required only interest payments. At the end of 15 years, the borrower would be required to pay back the entire $200,000 in principal in one lump sum.

Advantages. Bullet strategies are relatively simple to implement and construct. The first step is to determine at what point on the yield curve the series of investments should mature. This will help lead to the incremental acquisition of additions to the portfolio that will reach maturity on the same target date.

The GIC works much like a certificate of deposit in the U.S. In the case of GICs, you deposit money in the bank and earn interest on that money. The catch is, the money must be deposited for a fixed length of time, and interest rates vary ing to how long that commitment is.

A bullet bond is a fixed-income security type with a specific maturity date and pays periodic interest over the bond's life. Unlike amortizing bonds with regular principal repayments, bullet bonds repay the entire principal amount in a lump sum on the maturity date.

Bullet strategy. A fixed income strategy in which a portfolio is constructed so that the maturities of its securities are highly concentrated at one point on the yield curve.

Bullet Loans vs. Rather than the gradual repayment of the loan principal over the borrowing term, as seen in amortizing loans, one lump sum repayment of the loan principal is made on the date of the maturity.

Breaking Down Bullet A bullet loan requires the principal of the loan to be paid in full when the loan matures. With this type of loan, borrowers may have the option to make no payments during the life of the loan. Alternately, they could make interest-only payments, thus reducing the lump-sum amount due at maturity.