RACs = Range Accrual Callables

Structured product where the coupon is linked to the performance of a reference index, for example 6m Libor. The return from the note will be higher than that from traditional fixed-rate deposits if the 6m Libor moves within a pre-determined range during the life of the note.

Investors can obtain an even higher return by adding more risk to the structure: by making the note callable. A callable range accrual note is a range accrual note where the issuer has the option to call the note at specified dates in the future, typically at par.