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DIFFERENT TYPES OF GICs
a) ESCALATOR GIC: a compounding 5 year deposit paying
a higher rate of interest each year on the anniversary date of
deposit, and the interest rate to be paid each year is stated
at the time of the GIC purchase
b) EQUITY LINKED GIC:
- returns are linked to the cumulative market returns of a stock
index or equity mutual fund over the term specified
- offer the potential of earning rate of return from cumulative
increase in benchmark indicator over term of investment
- return of principal guaranteed but no interest guarantee
- end of each year earn a rate of interest = change in stock
index used in calculating GIC return
- if cumulative negative return at end of investment term no
interest is earned
- income earned = interest income for tax purposes
c) INTEREST RATE LINKED GICS:
i) PRIME RATE LINKED GIC: 1 year term with interest rate linked
to the financial institutions prime rate and changed by same
percentage as change in the issuing financial institutions prime
rate
ii) MARKET RATE LINKED GIC: term greater than 1 year and interest
rate adjustments made on anniversary date of issue
d) INTEREST RATE LINKED GICS FOR LESSER THAN 1 YEAR:
- usually can be cashed at any time, however subject to penalty
if cashed before 30 days
e) INTEREST RATE LINKED GICS ISSUED FOR GREATER THAN 1 YEAR:
- pay returns linked to return on similar GICS with interest
rate compared to current rates on standard GICs with term =
term of maturity each anniversary of deposit
- interest linked GIC only adjusted if standard GIC rate greater
than or = 1%
This material is for information purposes only and should
not be construed as legal or tax advice. Every effort has been
made to ensure its accuracy, but errors and omissions are possible.
Individual circumstances may vary and specific legal and tax advice
is recommended. Future tax changes and market conditions may affect
this information.
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