Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-275898
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The information in this preliminary terms supplement is not complete and may be changed.
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Preliminary Terms Supplement
Subject to Completion:
Dated April 23, 2024
Pricing Supplement Dated April __, 2024 to the Product Prospectus Supplement ERN-EI-1, the Prospectus Supplement and the Prospectus, Each Dated
December 20, 2023
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$
Digital Notes with Barrier Linked to the Lesser
Performing of Three Equity Indices, Due June 3, 2025
Royal Bank of Canada
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Reference Assets
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Initial Level*
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Digital Barrier Level
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Barrier Levels
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S&P 500® Index (“SPX”)
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50% of its Initial Level
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70% of its Initial Level
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Russell 2000® Index (“RTY”)
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50% of its Initial Level
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70% of its Initial Level
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Dow Jones Industrial Average™ (“INDU”)
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50% of its Initial Level
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70% of its Initial Level
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If the Final Level of the Lesser Performing Reference Asset (as defined below) is greater than or equal to its Digital Barrier Level, the Notes will pay at maturity a return equal to the Digital Return. The
Digital Return will be 8.75% of the principal amount. An investor’s return on the Notes will not exceed the Digital Return.
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In addition, we will pay the principal amount of the Notes if the Final Level of the Lesser Performing Reference Asset is greater than or equal to its Barrier Level. However, if the Final Level of the Lesser
Performing Reference Asset is less than its Barrier Level, investors will lose 1% of the principal amount of the Notes for each 1% decrease from its Initial Level to its Final Level.
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Accordingly, investors in the Notes will be subject to the risk of not receiving the Digital Return, as well as the risk of receiving an amount at maturity that is less than the principal amount.
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Any payments on the Notes are subject to our credit risk.
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The Notes do not pay interest.
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The Notes will not be listed on any securities exchange.
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Per Note
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Total
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Price to public(1)
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100.00%
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$
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Underwriting discounts and commissions(1)
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1.00%
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$
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Proceeds to Royal Bank of Canada
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99.00%
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$
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Digital Notes with Barrier Linked to the Lesser
Performing of Three Equity Indices
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General:
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This terms supplement relates to an offering of Digital Notes with Barrier Linked to the Lesser Performing of Three Equity Indices (the “Notes”).
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Issuer:
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Royal Bank of Canada (the “Bank”)
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Trade Date (Pricing
Date):
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April 29, 2024
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Issue Date:
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May 2, 2024
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Valuation Date:
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May 29, 2025
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Maturity Date:
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June 3, 2025
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Denominations:
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Minimum denomination of $1,000, and integral multiples of $1,000 thereafter.
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Initial Level:
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For each Reference Asset, its closing level on the Trade Date.
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Final Level:
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For each Reference Asset, its closing level on the Valuation Date.
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Barrier Level:
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For each Reference Asset, 70% of its Initial Level.
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Digital Barrier Level:
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For each Reference Asset, 50% of its Initial Level.
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Digital Payment:
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If the Final Level of the Lesser Performing Reference Asset is greater than or equal to its
Digital Barrier Level (that is, its Percentage Change is greater than or equal to -50.00%), then the investor will receive, for
each $1,000 in principal amount of the Notes, an amount equal to:
$1,000 x Digital Return
If the Final Level of the Lesser Performing Reference Asset is less than its Digital Barrier Level (that is, its Percentage
Change is less than -50.00%), then the Digital Payment will not be payable.
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Portion of Principal
Payable at Maturity:
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In addition to the Digital Payment, we will pay the full principal amount of the Notes at maturity if the Final Level of the Lesser Performing Reference Asset is greater than or equal to its
Barrier Level (that is, the Percentage Change of the Lesser Performing Reference is greater than or equal to -30%).
If the Final Level of the Lesser Performing Reference Asset is less than its Barrier Level (that is, the Percentage Change of the Lesser Performing Reference Asset is less than -30%), then, in addition to the Digital Payment (if payable), we will pay less than the principal amount at maturity. In such a case, for each $1,000 in principal amount of
the Notes, an amount equal to:
$1,000 + ($1,000 x Percentage Change)
In this case, you may lose all or a substantial portion of the principal amount. You may lose a portion of the principal amount even if we pay the Digital Payment at
maturity. See the section “Hypothetical Examples” below.
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Percentage Change:
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With respect to each Reference Asset:
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Digital Return:
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8.75%. An investor’s return on the Notes will not exceed the Digital Return.
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Lesser Performing
Reference Asset:
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The Reference Asset which has the lowest Percentage Change.
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Principal at Risk:
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The Notes are NOT principal protected. You may lose all or a substantial portion of your principal amount at maturity if the
Final Level of the Lesser Performing Reference Asset is less than its Barrier Level.
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Digital Notes with Barrier Linked to the Lesser
Performing of Three Equity Indices
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Market Disruption
Events:
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If a market disruption event occurs on the Valuation Date as to a Reference Asset, the determination of the Final Level of that Reference Asset will be postponed. However, the determination
of the Final Level of any Reference Asset that is not affected by that market disruption event will not be postponed.
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Calculation Agent:
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RBC Capital Markets, LLC (“RBCCM”)
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U.S. Tax Treatment:
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By purchasing a Note, each holder agrees (in the absence of a change in law, an administrative determination or a judicial ruling to the contrary) to
treat the Note as a pre-paid cash-settled derivative contract in respect of the Reference Assets for U.S. federal income tax purposes. However, the U.S. federal income tax consequences of your investment in the Notes are uncertain and
the Internal Revenue Service could assert that the Notes should be taxed in a manner that is different from that described in the preceding sentence. Please see the section below, “Supplemental Discussion of U.S. Federal Income Tax
Consequences,” and the discussion (including the opinion of our special U.S. tax counsel, Ashurst LLP) in the product prospectus supplement dated December 20, 2023 under “Supplemental Discussion of U.S. Federal Income Tax Consequences,”
which apply to the Notes.
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Secondary Market:
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RBCCM (or one of its affiliates), though not obligated to do so, may maintain a secondary market in the Notes after the issue date. The amount that you
may receive upon sale of your Notes prior to maturity may be less than the principal amount.
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Listing:
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The Notes will not be listed on any securities exchange.
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Settlement:
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DTC global (including through its indirect participants Euroclear and Clearstream, Luxembourg as described under “Ownership and Book-Entry Issuance” in
the prospectus dated December 20, 2023).
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Terms Incorporated in
the Master Note:
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All of the terms appearing on the cover page and above the item captioned “Secondary Market” in this section and the terms appearing under the caption
“General Terms of the Notes” in the product prospectus supplement, as modified by this terms supplement.
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Digital Notes with Barrier Linked to the Lesser
Performing of Three Equity Indices
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Digital Notes with Barrier Linked to the Lesser
Performing of Three Equity Indices
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Hypothetical Initial Level (for each Reference Asset):
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1,000.00*
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Hypothetical Digital Barrier Level (for each Reference Asset):
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500.00, which is 50.00% of the hypothetical Initial Level
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Hypothetical Barrier Level (for each Reference Asset):
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700.00, which is 70.00% of the hypothetical Initial Level
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Digital Return:
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8.75%
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Principal Amount:
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$1,000 per Note
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Hypothetical Final Level of the
Lesser Performing Reference Asset
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Digital Payment
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Portion of Principal Amount Payable
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Payment at Maturity
per $1,000 in Principal
Amount
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1,300.00
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$87.50
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$1,000.00
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$1,087.50
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1,200.00
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$87.50
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$1,000.00
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$1,087.50
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1,100.00
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$87.50
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$1,000.00
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$1,087.50
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1,087.50
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$87.50
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$1,000.00
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$1,087.50
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1,050.00
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$87.50
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$1,000.00
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$1,087.50
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1,020.00
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$87.50
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$1,000.00
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$1,087.50
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1,000.00
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$87.50
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$1,000.00
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$1,087.50
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900.00
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$87.50
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$1,000.00
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$1,087.50
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800.00
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$87.50
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$1,000.00
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$1,087.50
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700.00
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$87.50
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$1,000.00
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$1,087.50
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600.00
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$87.50
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$600.00
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$687.50
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500.00
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$87.50
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$500.00
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$587.50
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400.00
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N/A
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$400.00
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$400.00
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300.00
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N/A
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$300.00
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$300.00
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200.00
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N/A
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$200.00
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$200.00
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100.00
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N/A
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$100.00
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$100.00
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0.00
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N/A
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$0.00
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$0.00
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Digital Notes with Barrier Linked to the Lesser
Performing of Three Equity Indices
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Example 1—
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Calculation of the Payment at Maturity where the Percentage Change of the Lesser Performing Reference Asset is negative, but its Final Level is greater than its Digital Barrier Level and its
Barrier Level.
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Percentage Change:
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-10%
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Payment at Maturity:
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Digital Payment of $87.50, plus full repayment of principal = $1,087.50
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In this case, on a $1,000 investment, a -10% Percentage Change in the Lesser Performing Reference Asset results in a Payment at Maturity of $1,087.50, a return of 8.75% on the Notes.
In this case, the return on the Notes is greater than the Percentage Change of the Lesser Performing Reference Asset. The return on the Notes is positive, even though the Percentage Change
of the Lesser Performing Reference Asset is negative.
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Example 2—
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Calculation of the Payment at Maturity where the Percentage Change of the Lesser Performing Reference Asset is positive.
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Percentage Change:
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20%
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Payment at Maturity:
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Digital Payment of $87.50, plus full repayment of principal = $1,087.50
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In this case, on a $1,000 investment, a 20% Percentage Change in the Lesser Performing Reference Asset results in a Payment at Maturity of $1,087.50, a return of 8.75% on the Notes.
In this case, the return on the Notes is less than the Percentage Change of the Lesser Performing Reference Asset.
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Example 3—
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Calculation of the Payment at Maturity where the Percentage Change of the Lesser Performing Reference Asset is negative and less than its Barrier Level, but is greater than its Digital
Barrier Level.
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Percentage Change:
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-40%
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Payment at Maturity:
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Digital Payment of $87.50; plus
$1,000 + ($1,000 x -40%) = $600.00
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In this case, on a $1,000 investment, a -40% Percentage Change in the Lesser Performing Reference Asset results in a Payment at Maturity of $687.50, a return of -31.25 on the Notes.
In this case, the return on the Notes is less than the Percentage Change of the Lesser Performing Reference Asset. The Digital Payment is paid, but a portion of the principal amount is not
paid.
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Digital Notes with Barrier Linked to the Lesser
Performing of Three Equity Indices
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Example 4—
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Calculation of the Payment at Maturity where the Percentage Change of the Lesser Performing Reference Asset is negative and less than both its Digital Barrier Level and Barrier Level.
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Percentage Change:
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-60%
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Payment at Maturity:
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In this case, the Digital Payment is not payable.
The investor will receive:
$1,000 + ($1,000 x -60%) = $400.00
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In this case, on a $1,000 investment, a -60% Percentage Change in the Lesser Performing Reference Asset results in a Payment at Maturity of $400, a return of -60.00% on the Notes. The Digital Payment is not
paid, and the investor loses a significant portion of its principal amount.
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Digital Notes with Barrier Linked to the Lesser
Performing of Three Equity Indices
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You May Lose All or a Significant Portion of the Principal Amount at Maturity – Investors in the Notes could lose some or all of their principal amount if there is a
decline in the level of the Lesser Performing Reference Asset between the Trade Date and the Valuation Date of more than 30%. In such a case, you will lose 1% of the principal amount of your Notes for each 1% that the Final Level of the
Lesser Performing Reference Asset is less than its Initial Level.
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You May Not Receive the Digital Payment at Maturity – The Digital Payment will only be paid if the Final Level of the Lesser Performing Reference Asset is greater than or
equal to its Digital Barrier Level. If the Digital Payment is not payable at maturity, you will also lose a portion of the principal amount, because the Final Level of the Lesser Performing Reference Asset in such a case will be less than
its Barrier Level.
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Your Potential Payment at Maturity Is Limited — The Notes will provide less opportunity to participate in the appreciation of any of the Reference Assets than an
investment in a security linked to that Reference Asset providing full participation in the appreciation, because the payment at maturity will not exceed the return represented by the Digital Return. Accordingly, your return on the Notes
may be less than your return would be if you made an investment in a security directly linked to the positive performance of the Lesser Performing Reference Asset.
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Your Redemption Amount Will Be Determined Solely by Reference to the Lesser Performing Reference Asset Even if the Other Reference Assets Perform Better – Your
Redemption Amount will be determined solely by reference to the performance of the Lesser Performing Reference Asset. Even if the Final Levels of the other Reference Assets have increased compared to their Initial Levels, or have
experienced a decrease that is less than that of the Lesser Performing Reference Asset, your return will only be determined by reference to the performance of the Lesser Performing Reference Asset, regardless of the performance of the
other Reference Assets. The Notes are not linked to a weighted basket, in which the risk may be mitigated and diversified among each of the basket components. For example, in the case of notes linked to a weighted basket, the return would
depend on the weighted aggregate performance of the basket components reflected as the basket return. As a result, the depreciation of one basket component could be mitigated by the appreciation of the other basket components, as scaled
by the weighting of that basket component. However, in the case of the Notes, the individual performance of each of the Reference Assets would not be combined, and the depreciation of one Reference Asset would not be mitigated by any
appreciation of the other Reference Assets. Instead your return will depend solely on the Final Level of the Lesser Performing Reference Asset. Because each Reference Asset tracks a different segment of the U.S. equities market, they may
each decrease in a comparable manner.
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The Notes Do Not Pay Interest and Your Return May Be Lower than the Return on a Conventional Debt Security of Comparable Maturity – You will not receive any interest
payments on the Notes as there would be on a conventional fixed-rate or floating-rate debt security having the same maturity. The return that you will receive on the Notes, which could be negative, may be less than the return you could
earn on other investments. The return on the Notes may be less than the return you would earn if you purchased one of our conventional senior interest bearing debt securities.
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Payments on the Notes Are Subject to Our Credit Risk, and Changes in Our Credit Ratings Are Expected to Affect the Market Value of the Notes – The Notes are our senior
unsecured debt securities. As a result, your receipt of the Redemption Amount is dependent upon our ability to repay our obligations at that time. This will be the case even if the levels of the Reference Assets increase after the Trade
Date. No assurance can be given as to what our financial condition will be at the maturity of the Notes.
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Digital Notes with Barrier Linked to the Lesser
Performing of Three Equity Indices
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There May Not Be an Active Trading Market for the Notes – Sales in the Secondary Market May Result in Significant Losses – There
may be little or no secondary market for the Notes. The Notes will not be listed on any securities exchange. RBCCM and our other affiliates may make a market for the Notes; however, they are not required to do so. RBCCM or any of our
other affiliates may stop any market-making activities at any time. Even if a secondary market for the Notes develops, it may not provide significant liquidity or trade at prices advantageous to you. We expect that transaction costs in
any secondary market would be high. As a result, the difference between bid and ask prices for your Notes in any secondary market could be substantial.
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The Initial Estimated Value of the Notes Will Be Less than the Price to the Public — The initial estimated value that will be set
forth on the cover page of the final pricing supplement for the Notes will not represent a minimum price at which we, RBCCM or any of our affiliates would be willing to purchase the Notes in any secondary market (if any exists) at any
time. If you attempt to sell the Notes prior to maturity, their market value may be lower than the price you paid for them and the initial estimated value. This is due to, among other things, changes in the levels of the Reference Assets,
the borrowing rate we pay to issue securities of this kind, and the inclusion in the price to the public of the underwriting discount, the referral fee and the estimated costs relating to our hedging of the Notes. These factors, together
with various credit, market and economic factors over the term of the Notes, are expected to reduce the price at which you may be able to sell the Notes in any secondary market and will affect the value of the Notes in complex and
unpredictable ways. Assuming no change in market conditions or any other relevant factors, the price, if any, at which you may be able to sell your Notes prior to maturity may be less than your original purchase price, as any such sale
price would not be expected to include the underwriting discount, the referral fee or the hedging costs relating to the Notes. In addition to bid-ask spreads, the value of the Notes determined by RBCCM for any secondary market price is
expected to be based on the secondary rate rather than the internal funding rate used to price the Notes and determine the initial estimated value. As a result, the secondary price will be less than if the internal funding rate was used.
The Notes are not designed to be short-term trading instruments. Accordingly, you should be able and willing to hold your Notes to maturity.
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The Initial Estimated Value of the Notes that We Will Provide in the Final Pricing Supplement Will Be an Estimate Only, Calculated as of the Time the Terms of the Notes Are Set
— The initial estimated value of the Notes will be based on the value of our obligation to make the payments on the Notes, together with the mid-market value of the derivative embedded in the terms of the Notes. See “Structuring
the Notes” below. Our estimate will be based on a variety of assumptions, including our credit spreads, expectations as to dividends, interest rates and volatility, and the expected term of the Notes. These assumptions are based on
certain forecasts about future events, which may prove to be incorrect. Other entities may value the Notes or similar securities at a price that is significantly different than we do.
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Our Business Activities May Create Conflicts of Interest — We and our affiliates expect to engage in trading activities related to the Reference Assets that are not for
the account of holders of the Notes or on their behalf. These trading activities may present a conflict between the holders’ interests in the Notes and the interests we and our affiliates will have in their proprietary accounts, in
facilitating transactions, including options and other derivatives transactions, for their customers and in accounts under their management. These trading activities, if they influence the levels of the Reference Assets, could be adverse
to the interests of the holders of the Notes. We and one or more of our affiliates may, at present or in the future, engage in business with companies included in the Reference Assets, including making loans to or providing advisory
services. These services could include investment banking and merger and acquisition advisory services. These activities may present a conflict between our or one or more of our affiliates’ obligations and your interests as a holder of
the Notes. Moreover, we and our
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Digital Notes with Barrier Linked to the Lesser
Performing of Three Equity Indices
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You Will Not Have Any Rights to the Securities Included in the Reference Assets – As a holder of the Notes, you
will not have voting rights or rights to receive cash dividends or other distributions or other rights that holders of securities included in the Reference Assets would have. The Final Level will not reflect any dividends paid on the
securities included in the Reference Assets, and accordingly, any positive return on the Notes may be less than the potential positive return on those securities.
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The Payments on the Notes Are Subject to Postponement Due to Market Disruption Events and Adjustments – The Redemption Amount and the Valuation
Date are subject to adjustment as to each Reference Asset as described in the product prospectus supplement. For a description of what constitutes a market disruption event as well as the consequences of that market disruption event,
see “General Terms of the Notes—Market Disruption Events” in the product prospectus supplement.
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An Investment in the Notes Linked to the RTY Is Subject to Risks Associated in Investing in Stocks With a Small Market Capitalization — The RTY consists of stocks issued by companies with relatively small market capitalizations. These companies often have greater stock price volatility, lower trading volume and less liquidity than
large-capitalization companies. As a result, the level of the RTY may be more volatile than that of a market measure that does not track solely small-capitalization stocks. Stock prices of small-capitalization companies are also
generally more vulnerable than those of large-capitalization companies to adverse business and economic developments, and the stocks of small-capitalization companies may be thinly traded, and be less attractive to many investors if
they do not pay dividends. In addition, small capitalization companies are often less well-established and less stable financially than large-capitalization companies and may depend on a small number of key personnel, making them more
vulnerable to loss of those individuals. Small capitalization companies tend to have lower revenues, less diverse product lines, smaller shares of their target markets, fewer financial resources and fewer competitive strengths than
large-capitalization companies. These companies may also be more susceptible to adverse developments related to their products or services.
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Digital Notes with Barrier Linked to the Lesser
Performing of Three Equity Indices
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Digital Notes with Barrier Linked to the Lesser
Performing of Three Equity Indices
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Digital Notes with Barrier Linked to the Lesser
Performing of Three Equity Indices
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Digital Notes with Barrier Linked to the Lesser
Performing of Three Equity Indices
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Digital Notes with Barrier Linked to the Lesser
Performing of Three Equity Indices
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Digital Notes with Barrier Linked to the Lesser
Performing of Three Equity Indices
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Digital Notes with Barrier Linked to the Lesser
Performing of Three Equity Indices
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Digital Notes with Barrier Linked to the Lesser
Performing of Three Equity Indices
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Digital Notes with Barrier Linked to the Lesser
Performing of Three Equity Indices
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Digital Notes with Barrier Linked to the Lesser
Performing of Three Equity Indices
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Digital Notes with Barrier Linked to the Lesser
Performing of Three Equity Indices
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Digital Notes with Barrier Linked to the Lesser
Performing of Three Equity Indices
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Digital Notes with Barrier Linked to the Lesser
Performing of Three Equity Indices
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Digital Notes with Barrier Linked to the Lesser
Performing of Three Equity Indices
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