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Old 03-25-2016, 08:50 AM   #2
Franchise Player
Join Date: Dec 2006
Location: Calgary, Alberta

Wow, those are solid rates. Are you not in Canada? I don't see rates anywhere near that for a year, and not in a high interest account either? Bear in mind that some places offer "teaser rates" that will give you a higher rate for a shorter period and then the rates decline after say 90 days.

Anyway, the best thing to do here is look at the effective annual interest rate. This doesn't take things like the fact that the GIC is locked-in into account, or potential similar issues with the high-interest accounts, but just compares that interest over a one year period. The formula for this is (1+i/n) to the power of n, and then subtract 1.

i=the interest rate
n= number of compounding periods

Sorry I can't get the superscript to work here so that formula is a little wonky. This accounts for the compounding though and makes the comparison easier.
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