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. (No calculations needed.)

Multiple Choice

• Option A has the higher future value at the end of Year 3.

• Option B has a higher present value at Time 0.

• Both options are of equal value since they both provide $12,000 of income.

• Option A is an annuity.

• Option B is a perpetuity.