1. Test 1, 10am Lecture Spring 2014 Solution Sketches

2. Multiple Choice #1 1.Ms. Jacobs will receive $1,000 later today. Subsequent payments will be paid annually, starting one year from today, and will finish 9 years from today. Each payment will be 8% higher than the previous payment. What is the present value of all payments if the effective annual interest rate is 8%? (Hint: Avoiding the formula sheet may make this problem easier to solve.)

3. Multiple Choice #1

4. Multiple Choice #2

5. Multiple Choice #3

6. Multiple Choice #4 4.Lucinda invests $6,000 today, which will pay out $800 each of the next 20 years, starting one year from today. Her stated annual interest rate is 9%, compounded monthly. What is the profitability index of this investment?

7. Multiple Choice #4

8. Multiple Choice #5 5.Lane takes out a $100,000 loan later today. This loan has a 12% stated annual interest rate, compounded monthly, and a minimum monthly payment of 0.8% per month for the next year. He makes the first payment one month from today. If he makes the minimum monthly payment each month, how much will his payment be three months from today?

9. Multiple Choice #5

10. Free Response #1

12. Free Response #2