using the following maturity terms and annual interest rate : Maturity Annual Interest Rate (%) 1 Year
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Question:
using the following maturity terms and annual interest rate :
Maturity | Annual Interest Rate (%) |
1 Year | 1.25% |
2 Years | 1.5% |
5 Years | 2% |
10 Years | 3% |
Assuming joe and julia has their first yearly saving of $300 X 12 = $3600 per year which will be invested in GIC, advise the joe and julia on which maturity to select when investing their savings for their children's education:
- Investing in one year GIC and keep renewing the principal and compound interest year after year until you reach 12 years.(5 marks)
- Invest in 5 years GIC two times (i.e. after one term of 5 year, you take the value of your investment and then invested in another 5 years GICs), thereafter, you invest in 2 years GICs to finish the 12 years cycle(5 marks)
- Invest in one 10 years GIC term and then 2 years GICs. (4 marks)
calculate the three option assuming you are ONLY investing $3600 (once) at the end of the year for 12 year.
Related Book For
Financial Management for Public Health and Not for Profit Organizations
ISBN: 978-0132805667
4th edition
Authors: Steven A. Finkler, Thad Calabrese
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