Lottery bonds have been issued by public authorities in Belgium, Ireland, Pakistan, Sweden, New Zealand, the UK and other nations.
This means that any purchaser of a single bond for EUR 1,000 will receive annual interest a little above the bank rate, but will also have a 1.2% chance of winning an additional 25% of their original investment.
This element of chance appeals to a section of society who will take a lower guaranteed return in the hope of a windfall.
Equivalently, they were bonds with annual interest rate 10+x%, where x is drawn from a lottery that gave x = 1.5 effectively.
Through the NS&I (National Savings and Investment), the public can purchase Premium Bonds worth £1 each, with a minimum spend of £25.
The prize fund is paid for out of the equivalent interest payable on the entire bond pool for that month.
As of 2020 the prize fund rate is 4.65%[5] implying that a bond holder can expect to achieve a mean long term return of 4.65% per annum.