Bank Investment Contract is a legal contract and it is comprised of a single security and the portfolio of securities that offer the investor a guaranteed rate of return. As the name of the contract indicates it is a bank investment contract and bank is involved in this kind of investment. The rate of return over this investment is guaranteed by the bank and bank ensures the rate of the return. There is a predetermined length of the investment over which the bank ensures the rate of the return. The predetermined length can be 1 to 10 years. Although the bank investment contract is a low yield contract that means the rate of return on the bank investment contract is generally low as compared to the investment in stocks or bonds of some other business entities however the risk associated with bank investment contract is also low as compared to the risk associated with other sort of investments.
Most of the people who go for a bank investment contract are actually looking for the preservation of their money rather than wealth or greater returns. Bank Investment contract is similar to that of guarantee investment contract where the rate of return is guaranteed and the rate of risk is usually low. The difference between Guarantee Investment Contract and the Bank Investment Contract is that the former are offered by the insurance companies where as later are offered by the banks