Why might Casey earn more interest in the last year of his GIC compared to the first year?

Earning more interest in the last year of a Guaranteed Investment Certificate (GIC) compared to the first year can primarily be attributed to the effects of compounded interest.

When interest is calculated on both the initial principal and the accumulated interest from previous periods, the amount of interest earned increases over time. This is known as compound interest, and it means that in the later years of the investment, the value of the principal grows because you earn interest not only on your original amount but also on the interest that has been added to that principal in prior years.

As a result, if Casey’s GIC compounds annually, the total interest earned in the final year will reflect both the original principal and the interest that has been accumulated over the previous years, leading to potentially higher interest earned in the last year compared to the first.

Other factors like inflation rates, changes in the stock market, or an increased principal investment might influence the overall financial environment but they do not directly explain the mechanics of how interest on a GIC is calculated and grows over time.