Explanation:

The correct answer is B ($3,749) because the investment is a delayed annuity with the first payment starting at t = 3. The calculation involves two steps:

1. Compute the present value of an ordinary annuity at t = 2 (since the first payment is one period away from t = 2): $PV_2 = A \left[ \frac{1 - \frac{1}{(1 + r)^N}}{r} \right] = 1,000 \left[ \frac{1 - \frac{1}{(1 + 0.06)^5}}{0.06} \right] = 4,212.36$

2. Discount the lump sum from t = 2 to t = 0 using the present value formula: $PV_0 = FV (1 + r)^{-N} = 4,212.36 (1 + 0.06)^{-2} = 3,748.99$

Alternatively, the investment can be treated as an annuity due with the first payment at t = 3, discounted back three periods. Another method involves calculating the NPV of the cash flows directly. All approaches confirm the present value as $3,749.