You are comparing two investment options that each pay 5 percent interest, compounded annually. Both options will provide you with $21,000 of income. Option A pays $5,000 the first year followed by two annual payments of $8,000 each. Option B pays three annual payments of $7,000 each year (both Option A and Option B pay income at the end of each year). 1. Which option would an investor prefer? Show the calculations of the present value for both options.

You are comparing two investment options that each pay 5 percent interest, compounded annually. Both options will provide you with $21,000 of income. Option A pays $5,000 the first year followed by two annual payments of $8,000 each. Option B pays three annual payments of $7,000 each year (both Option A and Option B pay income at the end of each year). 1. Which option would an investor prefer? Show the calculations of the present value for both options.