Tanner is choosing between two mutually-exclusive investment options. These options have absolutely no risk, and Tanner can always borrow and lend at the risk-free rate.

Option 1. He can invest $500 now and get (guaranteed) $550 in one year.

Option 2. He can invest $600 now and get (guaranteed) $631.40 back later today.

Assume the risk-free interest rate is 3.5%. Which investment should Tanner prefer?

A.

$631.40 later today, since $1 today is worth more than $1 in one year.

B.

$550 in one year, since the Option 1's NPV is bigger than option 2's NPV.

C.

Neither

minus

both investments have a negative NPV.

D.

Tanner should be indifferent between the two investments