Assume that AT&Ts pension fund managers are considering two alternative securities as investments: (1) Security Z (for zero intermediate year cash flows), which costs $422.41 today, pays nothing during its 10-year life, and then pays $1,000 at the end of 10 years or (2) Security B, which has a cost today of $500 and pays $74.50 at the end of each of the next 10 years.

Which security would you recommend be purchased and why?

Security Z:

Security B: