You have a one-year investment horizon with $1,000,000 in hand, and are presented with two fixed-income investment options. Which one provides a higher return? Assume your goal is to maximize returns.

1. Lend at 10% for a year.
2. 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.

Group of answer choices

Option 2 provides a higher return.

Cannot decide.

Option 1 provides a higher return.