Comparing two investment options

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Reference no: EM13944961

You are comparing two investment options that each pay 6 percent interest, compounded annually. Both options will provide you with $12,000 of income. Option A pays $2,000 the first year followed by two annual payments of $5,000 each. Option B pays three annual payments of $4,000 each. Which one of the following statements is correct given these two investment options? Assume a positive discount rate. Both options are of equal value since they both provide $12,000 of income.

-Option A has the higher future value at the end of year three.

-Option B has a higher present value at time zero.

-Option B is perpetuity.

-Option A is an annuity.

Reference no: EM13944961

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