Which is better: (1) Investing $10,000 in a guaranteed investment certificate (GIC) for one year at 8

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Which is better:

(1) Investing $10,000 in a guaranteed investment certificate (GIC) for one year at 8 percent when expected inflation is 4 percent

(2) Investing $10,000 in a GIC at 6 percent when expected inflation is 2 percent? In assessing these alternatives, assume that interest received is taxed at a rate of 32 percent.

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Corporate Finance

ISBN: 978-0071339575

7th Canadian Edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Gordon Ro

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Question Posted: Jun 17, 2015 04:41 AM

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Which is better: (1) Investing $10,000 in a guaranteed investment certificate (GIC) for one year at 8

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1 In nominal terms you could receive one year from now aftertax 1054400 10000 10000 x 008 x068 whic...View the full answer

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