Suppose that you are considering investing $1,000 in bank CDs.
a. First, you consider one of the following CDs:
• CD 1, which will pay an interest rate of 5% per year for three years

• CD 2, which will pay an interest rate of 8% the first year, 5% the second year, and 3% the third year
Which CD should you choose?
b. Would your answer to part (a) change if the second CD pays an interest rate of 1% the first two years and 10% in the third year? Briefly explain.
c. Now, suppose that in addition to the two CDs described in part (a), there is a third CD that pays an interest rate of 3% the first two years and an interest rate of 7% the third year. How does the future value of this investment compare to the other two? Which is the best investment?