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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

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92783157

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