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

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%