1. Which of the following 1-year investments has the highest rate of return? $12,500 that yields $1125 in interest. $56,000 that yields $6160 in interest. $95,000 that yields $7600 in interest. 2. Construct a cash flow diagram that represents the amount of money that will be accumulated in 7 years from an initial investment of $20,000 now and $3,500 per year for 7 years at an interest rate of 8% per year. 3. Use economic equivalence to determine the amount of money or value of i that makes the following statements correct. (a) $5000 today is equivalent to $4275 exactly 1 year ago at i = % per year. (b) A car that costs $28,000 today will cost $ a year from now at i=4% per year. (c) At i =4% per year, a car that costs $28,000 now, would have cost $ one year ago. (d) Last year, Jackson borrowed $20,000 to buy a preowned boat. He repaid the principal of the loan plus $2750 (e) interest after only 1 year. This year, his brother Henri borrowed $15,000 to buy a car and expects to pay it off in only 1 year plus interest of $2295. The rate that each brother paid for his loan is % for Jackson and % per year for Henri. (f) Last year, Sheila turned down a job that paid $75,000 per year. This year, she accepted one that pays $81,000 per year. The salaries are equivalent at i= % per year. 4. If you were to deposit $10,000 at 10% per year simple interest in a project, what compound interest rate would yield the same amount of money in 3 years