Royal bank is offering a 1-year GIC that is linked to the TSE300 Index in the following

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Royal bank is offering a 1-year GIC that is linked to the TSE300 Index in the following way:

If the Index goes up by 25% in one-year's time, the GIC will return $1250.

If the Index doesn't change, the GIC will return the principal amount of $1000.

How much should you pay for these GICs? Assume that the TSE300 Index will be either up by 25%, or not change over the following year. The risk-free rate is 5%.

Related Book For answer-question

Foundations of Financial Management

ISBN: 978-1259024979

10th Canadian edition

Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta

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Posted Date: Oct 10, 2023 06:00 AM

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Royal bank is offering a 1-year GIC that is linked to the TSE300 Index in the following

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Calculate the expected value of the GICs return is calculated as the weighted average ... View the full answer

Foundations of Financial Management

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