Paul Has $20,000 to Invest for 6 Months

question 90

Short Answer

Paul has $20,000 to invest for 6 months. For this amount, his bank pays 1.3% simple interest on a 90-day GIC and 1.5% on a 180-day GIC. If the interest rate on a 90-day GIC is the same 3 months from now, how much more interest will Paul earn by purchasing the 180-day GIC than by buying a 90-day GIC and then reinvesting its maturity value in a second 90-day GIC?

Evaluate the criticisms and developments in the status attainment model.

Develop critical thinking and analytical skills by constructing and answering relevant sociological questions.

Understand the concept of opportunity cost in holding money and its calculation.

Recognize the relationship between interest rates and the quantity of money demanded.

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Definitions:

Product Markets

Markets where final goods or services are offered to consumers, businesses, and the government.

Economic Decision Makers

Individuals or entities that make choices regarding the allocation of resources and the consumption of goods and services.

Profit

The financial gain obtained when the revenue generated from business activities exceeds the expenses, costs, and taxes involved in sustaining the activity.

Payment

The act of transferring money or its equivalent in return for goods, services, or fulfilling an obligation.