Marta Received an Inheritance of $20 000 and Wants to Allocate

question 6

Multiple Choice

Marta received an inheritance of $20 000 and wants to allocate it towards her six-year-old son's education in the most effective manner.Which of the following considerations will have the greatest financial impact?

• A)Contributing to an RESP in such a way as to collect the maximum Canada Education Savings Grant
• B)Benefiting from the tax deferral in an RESP account as quickly as possible
• C)Applying for the Canada Learning Bond as soon as possible
• D)Collecting the maximum Educational Assistance Payments in the RESP account

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Definitions:

Effective Rate

The actual interest rate an individual earns or pays on an investment or loan, taking into account the effect of compounding.

Semi-annually Compounded

This refers to the process of applying interest to a principal balance twice a year, effectively increasing the amount of interest earned or paid over time.

Rate of Return

The profit or deficit incurred on an investment during a certain timeframe, represented as a proportion of the investment's original price.

Maturity Date

The date on which the principal and accrued interest on an investment or loan are due.