You Are Comparing Two Investment Options,each of Which Will Provide

question 69

Multiple Choice

You are comparing two investment options,each of which will provide $15,000 of total income.Option A pays five annual payments starting with $5,000 the first year followed by four annual payments of $2,500 each.Option B pays five annual payments of $3,000 each.Which one of the following statements is correct given these two investment options?

• A)Both options are of equal value today.
• B)Given a positive rate of return,Option A is worth more today than Option B.
• C)Option B has a higher present value than Option A given a positive rate of return.
• D)Option B has a lower present value than Option A given a zero rate of return.
• E)Option A is preferable because it is an annuity due.