Suppose that the current rates on 90-and 180-day GICs are 3.25% and 3.50% simple interest, respectively. An investor is weighing the alternatives of purchasing a 180-day GIC versus purchasing a 90-day GIC and then reinvesting its maturity value in a second 90-day GIC. What would the interest rate on 90-day GICs have to be 90 days from now for the investor to end up in the same financial position with either alternative?

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The Answer of Suppose that the current rates on 90-and 180-day GICs are 3.25% and 3.50% simple interest, respectively. An investor is weighing the alternatives of purchasing a 180-day GIC versus purchasing a 90-day GIC and then reinvesting its maturity value in a second 90-day GIC. What would the interest rate on 90-day GICs have to be 90 days from now for the investor to end up in the same financial position with either alternative?

Suppose That the Current Rates on 90-And 180-Day GICs Are