Which GIC offers interest rates linked to changes in other rates, such as the prime rate?

Which GIC offers interest rates linked to changes in other rates, such as the prime rate?

• A. Installment GICs
• B. Index-Linked GICs
• C. Commercial Paper
• D. Bonds

Answer: (B)

Index-linked GICs are specifically designed to offer interest rates that fluctuate based on changes in a specified index, which is frequently the prime rate or other market interest rates. This type of GIC provides investors with the potential for higher returns compared to traditional fixed-rate GICs, as the interest they earn can increase if the underlying index rises. Unlike installment GICs, which pay interest at regular intervals and typically have a fixed rate for the term, index-linked GICs are tied to the performance of a financial index. Commercial paper is a type of short-term debt instrument used by corporations to finance their immediate needs and does not involve interest rates tied to a GIC structure. Similarly, bonds generally offer fixed interest payments based on the terms set at issuance and are not linked to variable rates like the prime rate. Therefore, the unique feature of index-linked GICs, which ties their performance directly to changes in specific interest rates, makes them the correct answer.

Index-linked GICs are specifically designed to offer interest rates that fluctuate based on changes in a specified index, which is frequently the prime rate or other market interest rates. This type of GIC provides investors with the potential for higher returns compared to traditional fixed-rate GICs, as the interest they earn can increase if the underlying index rises.

Unlike installment GICs, which pay interest at regular intervals and typically have a fixed rate for the term, index-linked GICs are tied to the performance of a financial index. Commercial paper is a type of short-term debt instrument used by corporations to finance their immediate needs and does not involve interest rates tied to a GIC structure. Similarly, bonds generally offer fixed interest payments based on the terms set at issuance and are not linked to variable rates like the prime rate. Therefore, the unique feature of index-linked GICs, which ties their performance directly to changes in specific interest rates, makes them the correct answer.