Suppose You Win a Small Lottery and You Are Given

Multiple Choice

Suppose you win a small lottery and you are given the following choice: You can receive (1) an immediate payment of $5,000 or (2) two annual payments, each in the amount of $2,700, with the first payment coming one year from now, and the second payment coming two years from now. You would choose to take the two annual payments if the interest rate is

A) 2 percent, but not if the interest rate is 3 percent.
B) 3 percent, but not if the interest rate is 4 percent.
C) 4 percent, but not if the interest rate is 5 percent.
D) 5 percent, but not if the interest rate is 6 percent.