(Future and Present Value Problems)

Presented below are three unrelated situations.

a. Ron Stein Company recently signed a lease for a new office building, for a lease period of 12 years. Under the lease agreement, a security deposit of $12,820 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? (Round answers to 0 decimal places, e.g. $458,581.)

b. Kate Greenway Corporation, having recently issued a $20,137,000, 15-year bond issue, is committed to make annual sinking fund deposits of $615,400. 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? (Round answers to 0 decimal places, e.g. $458,581.)

c. Under the terms of his salary agreement, president Juan Rivera has an option of receiving either an immediate bonus of $52,000, or a deferred bonus of $97,500 payable in 10 years. Ignoring tax considerations, and assuming a relevant interest rate of 8%, which form of settlement should Rivera accept?