QUESTION $12$

Tanner is choosing between two investment options. He can invest $$500$ now and get $($guaranteed$)$ $$550$ in one year, or

invest $$500$ now and get $($guaranteed$)$ $$531\mathrm{.}40$ back later today. The risk$-$free rate is $3\mathrm{.}5\%.$ Which investment should

Tanner prefer?

A$.$ Neither $-$ both investments have a negative NPV$.$

B$.$ $$531\mathrm{.}40$ later today, since $$1$ today is worth more than $$1$ in one year.

C$.$ $$550$ in one year, since it is $$50$ more than he invested rather than $$31\mathrm{.}40$ more than he invested.

D$.$ Tanner should be indifferent between the two investments, since both are equivalent to the same amount of cash

today.