Asked by Michael Morrison on Jul 15, 2024
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The BMO Bank of Montreal advertised rates of 1.8%, 2.25%, 2.6%, 3%, and 3.25% for the five successive years of its five-year compound-interest Rate Optimizer GIC. At the same time, the bank was offering fixed-rate five-year compound-interest GICs yielding 2.75% compounded annually. What total interest would be earned during the five-year term on a $5,000 investment in each type of GIC?
Compound-interest
Interest computed on both the original sum invested or loaned, as well as on the interest that has been added to this principal amount over earlier periods.
GIC
A Guaranteed Investment Certificate, a Canadian investment that offers a guaranteed rate of return over a fixed period.
Investment
The allocation of resources, such as time, money, or effort, in hope of generating a future benefit or profit.
- Analyze the interest earned on various compound-interest investments, such as GICs (Guaranteed Investment Certificates).
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Learning Objectives
- Analyze the interest earned on various compound-interest investments, such as GICs (Guaranteed Investment Certificates).
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