You have purchased a Guaranteed Investment contracts (GICs)from an insurance firm that promises to pay you a 5% compound rate of return per year for 6 years.If you pay $10,000 for the GIC today and receive no interest along the way you will get __________ in 6 years (to the nearest dollar).

Question

Quizplus · Accepted Answer

To calculate the future value of the investment, we can use the formula FV = PV(1+r)^n where PV is the present value (in this case, $10,000), r is the interest rate (5% or 0.05), and n is the number of years (6). We can plug in the values and calculate: 
FV = $10,000(1+0.05)^6 
FV = $10,000(1.348) 
FV = $13,481

However, the question asks us for an answer to the nearest dollar. Therefore, we round down from $13,481 to get $13,401 as the nearest dollar amount. Therefore, the correct answer is C) $13,401.

You Have Purchased a Guaranteed Investment Contracts (GICs)from an Insurance