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Guaranteed Investment Certificates.

Guaranteed Investment Certificates. Investment Options. Risk. Think about how you would invest your money in these situations: You’re 55, you have amassed a sizeable nest egg ($300k-all cash) and you have one year until retirement. What do you do with the $300k?

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Guaranteed Investment Certificates.

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  1. Guaranteed Investment Certificates. Investment Options

  2. Risk • Think about how you would invest your money in these situations: • You’re 55, you have amassed a sizeable nest egg ($300k-all cash) and you have one year until retirement. What do you do with the $300k? • You’re 20 , it’s the beginning of summer and you just finished school for the year. You have $4000 for a new-ish car which you plan to purchase in September. What do you do with the $4000? Low Risk Investment

  3. GIC • GIC – Guaranteed Investment Certificate • You agree to lend your money to the financial institution, for a number of months or years. You can’t touch that money for a specified period of time without being penalized. • If you a buy a GIC, it cannot be sold.

  4. GIC’s • When a GIC matures(the term is over), you will be paid your principal (your original investment) back plus interest. • The longer the term, the higher the interest rate will be. • All GIC’s are insured by the Canadian Deposit Insurance Company (CDIC) as long as the term is 5 years and under.

  5. Visit http://www.ratesupermarket.ca • Which financial institution offers the best rate for 30 days, 180 days, 1 year, 3 year, 5 year and 10 years. • Which institutions offer the best rates overall, which offer the worst? Why do you think that is? • Why might someone choose a GIC with a lower rate?

  6. Calculation - Simple Some GIC’s only earn simple interest. Simple Interest Formula  Eg. You buy at $1000, 3 year GIC, that pays an interest rate of 10%. At Maturity you get your principal back ($1000) and your interest ($300) – In your pocket $1300

  7. Calculation – Compound Interest • Some GIC’s earn compound interest (interest gets added to the principal each year). • Same example as before:

  8. Compound Interest • Better Formula t - term of the GIC r - interest rate per period

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