How to find the Fair Market Value of GIC? currently, discount, interest, should

rkapoor

Been tasked with calculating the Fair Market Value of a 3 year GIC at work that currently has 2.5 years left. This is what I think I should do:

1) Calculate the FV of the GIC in 2.5 years
2) Ask the FI on what the interest rate would be on current 2.5 year GIC's
3) Use the rate in (2) as the discount rate and discount the FV calculated in (1) back 2.5 years

What do you guys think?

tango_gs

GIC valuation depends on existing interest rates

A 3 year GIC , in 2.5 years is nothing but a 180 day bond / bill as on today.

You have Future Value ( Face Value + 3 Year Int to be received ), Int Rates ( see the yeild curve for 180 days as on today), you have the time remaining, Calculate Present Value.

Hope this helps.

soverby

Carry the 1?

cjs238

nah nah you forgot you gotta carry the 1

ASSet_MANagemen

ks112 Wrote:
-------------------------------------------------------
> Been tasked with calculating the Fair Market Value
> of a 3 year GIC at work that currently has 2.5
> years left. This is what I think I should do:
>
> 1) Calculate the FV of the GIC in 2.5 years
> 2) Ask the FI on what the interest rate would be
> on current 2.5 year GIC's
> 3) Use the rate in (2) as the discount rate and
> discount the FV calculated in (1) back 2.5 years
>
> What do you guys think?


I agree.