Question
You want to choose between two investment options. Both options will provide you with $15,000 of income. Option A pays three annual payments of $5,000
You want to choose between two investment options. Both options will provide you with $15,000 of income. Option A pays three annual payments of $5,000 each. Option B pays $3,000 the first year followed by two annual payments of $6,000 each. Which one of the following statements is correct given these two investment options? Assume a positive discount rate.
Option A has a higher present value at time 0.
Option B has a higher future value at the end of year 3.
Both options have the same value at the end of year 3 since they both provide $15,000 of income.
Both options are of equal value today since they both provide $15,000 of income.
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