You are offered a choice between two payment streams over time. Option 1 is $100

Question

You are offered a choice between two payment streams over time. Option 1 is $100/year for 5 years (first payment is today, final payment is 4 years from now). Option 2 is $100/year for 6 years, starting one year from today (first payment is 1 year from now, final payment is 6 years from now). Which option(s) do I prefer.
Answer


Option 1 if r is 10%, option 1 if r is 15%


Option 1 if r is 10%, option 2 if r is 15%


Option 2 if r is 10%, option 1 if r is 15%


Option 2 if r is 10%, option 2 if r is 15%

Explanation / Answer

Option 2 if r is 10%, option 1 if r is 15%

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