You have a one-year investment horizon, and are presented with two fixed-income investment options. What is your preference between the two? Assume your goal is to maximize returns.

Lend at 10% for a year.

Lend at 8% for the first 6 months, and then lend at 12% for the second 6 months.

All rates above are expressed as bond-equivalent-yields, compounded semi-annually. Expand the answer to 4 or more decimal places.

Answer options:

Need more information.

Option 1 is better.

Option 2 is better.