Use of Financial Calculator TI BA II Plus required. The CIBC offers a GIC at 8 percent compounded annually and TD Bank offers the same rate but it is compounded semi-annually. What will be the return in five years on each bank's GIC for a $1000 investment?

Question

Quizplus · Accepted Answer

Using the BA II Plus financial calculator, the calculations are as follows:
For CIBC GIC:
N = 5 (number of years)
I/Y = 8 (interest rate)
PV = -1000 (present value)
FV = ? (future value)
CPT FV = $1469.33

For TD Bank GIC:
N = 5 (number of years)
I/Y = 8/2 = 4 (interest rate, semi-annual)
PV = -1000 (present value)
FV = ? (future value)
CPT FV = $1480.24

The difference in interest earned between the two options is $10.91. Therefore, the correct answer is C) The CIBC GIC will earn $469.33 and the TD Bank GIC will earn $480.24.

Use of Financial Calculator TI BA II Plus Required