Question 1Your broker has offered you two investment options. Each pays 5 percent interest, compounded annually. Option A pays three annual payments of $4,000 each. Option B pays three annual payments starting with $2,000 the first year followed by two annual payments of $5,000 each. Which one of the following statements is correct given these two investment options? Both options are of equal value given that they both provide $12,000 of income. Option A has the higher present value at time of investment .Option B has the higher present value future value at the end of year three.Option A is a perpetuity.Option B is an annuity.
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