Canadian Securities Course (CSC) Level 1 Practice Exam

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What is a Guaranteed Investment Certificate (GIC)?

A financial product that offers variable interest rates
An investment with no guaranteed returns
A deposit account at a financial institution
A GIC offers fixed rates of interest for a specific term. Both principal and interest payments are guaranteed.

The correct answer is: A GIC offers fixed rates of interest for a specific term. Both principal and interest payments are guaranteed.

A Guaranteed Investment Certificate (GIC) is indeed a financial product that offers fixed rates of interest for a specific term, with both the principal and the interest payments guaranteed. This means that when you invest in a GIC, you know exactly how much interest you will earn over the term of the investment, and you are assured that your initial investment amount (the principal) will be returned to you at the end of the term. GICs are popular among conservative investors who prioritize capital preservation and predictability over high returns. They are commonly issued by banks and other financial institutions and can be structured in various ways, including different terms, interest payment frequencies, and options for redeeming the investment early under certain conditions. Overall, the defining characteristics of a GIC—fixed interest rates, a predetermined term, and guaranteed returns—differentiate it clearly from other financial instruments that may involve variable rates or lack guaranteed returns.