Suppose that the current rates on 180- and 360-day GICs are 1.25% and 1.50%, respectively. An investor is weighing the alternatives of purchasing a 360-day GIC versus purchasing a 180-day GIC and then reinvesting its maturity value in a second 180-day GIC. What would the interest rate on 180-day GICs have to be 180 days from now for the investor to end up in the same financial position with either alternative?
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