Presented below are three unrelated situations.

(a) Ron Stein Company recently signed a lease for a new office building, for a lease period of 11 years. Under the lease agreement, a security deposit of $13,690 is made, with the deposit to be returned at the expiration of the lease, with interest compounded at 10% per year. What amount will the company receive at the time the lease expires?

(b) Kate Greenway Corporation, having recently issued a $20,104,000, 15-year bond issue, is committed to make annual sinking fund deposits of $617,300. The deposits are made on the last day of each year and yield a return of 10%. Will the fund at the end of 15 years be sufficient to retire the bonds?

If not, what will the deficiency be?

(c) Under the terms of his salary agreement, president Juan Rivera has an option of receiving either an immediate bonus of $44,000, or a deferred bonus of $82,500 payable in 10 years. Ignoring tax considerations, and assuming a relevant interest rate of 8%, which form of settlement should Rivera accept?

Question 4

Stephen Bosworth, a super salesman contemplating retirement on his fifty-fifth birthday, decides to create a fund on an 9% basis that will enable him to withdraw $28,200 per year on June 30, beginning in 2016 and continuing through 2019. To develop this fund, Stephen intends to make equal contributions on June 30 of each of the years 2012