1. Bob Gibson has won the first prize in his companys annual Christmas party. The award is cash and he has three options to choose from:

I receive $1,000 now; II receive $400 at the end of each of the next three years; or III receive $500 at the end of one year, $400 at the end of two years, and $300 at the end of three years.

1. a) Which of the options should he choose if the rate of interest is: (i) 6%; (ii) 10%; (iii) 12%?
2. b) If the rates of interest for one-year, two-year and three-year deposits are 6%, 6.5% and 7%, respectively, which option is the best?