The Current Rates on 90- and 180-Day GICs Are 5

question 63

Multiple Choice

The current rates on 90- and 180-day GICs are 5.5% and 6% simple interest, respectively. An investor is trying to decide whether to purchase a 90-day GIC and then reinvest 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?

• A) 5.595%
• B) 6.500%
• C) 6.249%
• D) 6.413%
• E) 7.000%

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Definitions:

Operational Definition

A clear, detailed description of how variables in a study are measured or categorized.

Independent Variable

The factor in a study that the investigator alters to examine its impact on the dependent variable.

Inferential Statistics

A branch of statistics that deals with drawing conclusions about a population based on a sample.

Hypothesis

A proposed explanation for a phenomenon, which can be tested through experimentation or observation.