Tanner is choosing between two? mutually-exclusive investment options. These options have absolutely no? risk, and Tanner can always borrow and lend at the? risk-free rate.
Option 1. He can invest? $500 now and get? (guaranteed) $550 in one year.
Option 2. He can invest? $600 now and get? (guaranteed) $631.40 back later today.
Assume the? risk-free interest rate is? 3.5%. Which investment should Tanner? prefer?
A. ?$631.40 later? today, since? $1 today is worth more than? $1 in one year.
B. ?$550 in one? year, since the Option? 1's NPV is bigger than option? 2's NPV.
C. Neither minus− both investments have a negative NPV.
D. Tanner should be indifferent between the two investments