In computing your answers to the cases below, you can round your answer to the nearest dollar.

On January 1, 1998, XYZ Company sold $800,000 of 10% bonds, due January 1, 2008. Interest on

these bonds is paid on July 1 and January 1 each year. According to the terms of the bond contract,

XYZ must establish a sinking fund for the retirement of the bond principal starting no later than January

1, 2006. Since XYZ was in a tight cash position during the years 1998 through 2003, the first

contribution into the fund was made on January 1, 2004.

Case 1: Assume that, starting with the January 1, 2004 contribution, XYZ desires to make a total of

four equal annual contributions into this fund. Compute the amount of each of these

contributions assuming the interest rate is 8% compounded annually.

Case 2: Assume, instead, that starting with the January 1, 2006 contribution, XYZ desires to make a

total of five equal semiannual contributions into this fund. Compute the amount of each of

these contributions assuming the annual interest rate is 12%, compounded semiannually.

Case 3: On January 2, 2004, Notson Company loaned $50,000 to Pine Company. The terms of this loan

agreement stipulate that Pine is to make 5 equal annual payments to Notson at 10% interest

compounded annually. Assume the payments are to begin on December 31, 2004. Compute the

amount of each of these payments.

Case 4: Rex Jeter, a lawyer contemplating retirement on his 65th birthday, decides to create a fund on

an 8% basis which will enable him to withdraw $30,000 per year beginning June 30, 2007, and

ending June 30, 2011. To provide this fund, he intends to make equal contributions on June 30

of each of the years 2002 through 2006.

(a) How much must the balance of the fund equal after the last contribution on June 30, 2006

in order for him to satisfy his objective? EXPLAIN / CALCULATION

(b) What is each of his contributions to the fund? EXPLAIN/CALCULATION