Asked by Lauren Pennetta on May 13, 2024
Verified
On the same date that the CIBC advertised rates of 2%, 2.5%, 3%, 3.25%, and 7% in successive years of its five-year compound-interest Escalating Rate GIC, it offered 2.75% compounded annually on its five-year fixed-rate GIC. How much more will a $10,000 investment be worth at maturity if the Escalating Rate GIC is chosen instead of the fixed-rate GIC?
Escalating Rate GIC
A Guaranteed Investment Certificate (GIC) with an interest rate that increases at predetermined intervals throughout the term.
Fixed-rate GIC
Guaranteed Investment Certificate with a fixed interest rate for the term of the investment.
Maturity
The date on which the principal amount of a financial instrument such as a bond or loan is due to be paid in full.
- Examine the earnings from interest on different investments that utilize compound interest, including Guaranteed Investment Certificates (GICs).
- Calculate the future value of investments based on different compounding periods.
Verified Answer
SF
Learning Objectives
- Examine the earnings from interest on different investments that utilize compound interest, including Guaranteed Investment Certificates (GICs).
- Calculate the future value of investments based on different compounding periods.