Answer multiple choice.

1. Tracy receives cash flows of 75 today, 100 in one year, and 125 in two years. The present value of these cash flows is 283.62 at an annual effective rate of interest i. Calculate i.

a) 39% b) 5%

2. Project P requires an investment of 3750 at time 0. The investment pays 1750 at time 1 and 4000 at time 2. Project Q requires an investment of X at time 2. The investment pays 1750 at time 0 and 4000 at time 1. The net present values of the two projects are equal at an interest rate of 10%. Calculate X.

a) 5495 b) 5130

Please respond only if you are confident in your answers.