What periodic payment will an investor receive from a 10-year, $250,000 annual payment GIC earning a nominal rate of 5.88% compounded annually?
A) $7,600
B) $5,698
C) $19,267
D) $12,250
E) $14,700

Question

Quizplus · Accepted Answer

The investor will receive $14,700 annually from the GIC. This can be calculated using the formula for the annual payment of an annuity: $PMT = PV \times \frac{i}{1 - (1 + i)^{-n}}$, where $PMT$ is the annual payment, $PV$ is the present value or the amount of the GIC ($250,000), $i$ is the annual interest rate (5.88% or 0.0588), and $n$ is the number of periods (10 years). Plugging in the values, we get $PMT = 250,000 \times \frac{0.0588}{1 - (1 + 0.0588)^{-10}}$, which calculates to approximately $14,700.

What Periodic Payment Will an Investor Receive from a 10-Year