You are comparing two investment options.The cost to invest in either option is the same today.Both options will provide $20,000 of income.Option A pays five annual payments starting with $8,000 the first year followed by four annual payments of $3,000 each.Option B pays five annual payments of $4,000 each.Which one of the following statements is correct given these two investment options?
A) Option A is preferable because it is an annuity due.
B) Option A is the better choice of the two given any positive rate of return.
C) Option B has a higher present value than option A given a positive rate of return.
D) Option B has a lower future value at Year 5 than option A given a zero rate of return.
E) Both options are of equal value given that they both provide $20,000 of income.
Correct Answer:
Verified
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