The manager of a Canadian pension fund knows that the fund must make a lump-sum payment of
Question:
The manager of a Canadian pension fund knows that the fund must make a lump-sum payment of CAD5 million 10 years from today. She wants to invest an amount today in a guaranteed investment contract (GIC) so that it will grow to the required amount. The current interest rate on GICs is 6 percent a year, compounded monthly.
1. How much should she invest today in the GIC?
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1 By applying Equation 8 the required present value is calculated as follow In applyin...View the full answer
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