A bank offers a four-year "Escalating Rate GIC" on which the interest rate for year one is 3% compounded annually, 4% compounded annually for year two, 5% compounded annually for the third year and 6% compounded annually for the fourth year. Determine the maturity value of a $100,000 four-year "Escalating Rate GIC".
A) $116,794
B) $117,251
C) $118,704
D) $118,933
E) $119,225

Question

Quizplus · Accepted Answer

The maturity value is calculated by applying each year's interest rate sequentially: $100,000 * 1.03 * 1.04 * 1.05 * 1.06 = $119,225.

A Bank Offers a Four-Year "Escalating Rate GIC" on Which