1. You want to purchase a car today that has a total cost of $25,000. You plan to make a down payment of $4,000 and borrow the remainder from a bank that charges an interest rate of 6.25%. This loan will call for equal monthly payments over a period of five years, with the first payment due one month from today. How much of the first months payment goes towards paying down the principal amount on the loan?

a. $299.06

b. $130.21

c. $204.12

d. $109.38

e. $278.23

2. A project promises the following cash flows at the end of years 1 through 5, respectively: $3000; $5000; $5000; $4000; $1000. The project costs $14,000 today. Jake considers this project to be overpriced at $14,000. This implies that:

		a. Jakes required rate of return on this project is less than 7.00%.
		b. Jakes required of return on this project is less than 9.45%.
		c. Jakes required of return on this project is greater than 10.45%.
		d. Jakes required of return on this project is less than 9.91%.
		e. Jakes required of return on this project is greater than 9.91%.