6-6 Presented below are three unrelated situations agreement, a security deposit

Question

6-6 Presented below are three unrelated situations agreement, a security deposit ofefor a new office building. for a lease period of 11 years. Under the lease agreement, a security deposit of $12,290 is made, with the deposit to be returned at the expiration of the lease, with interest compounded at 5% per year. What amount will the company receive at the time the lease 1.25124 and final answer to o decimal places, e.g. 458,581.) expires? (Round factor values to 5 decimal places, e.g. The company will receive L?NK TO TEXT LINK TO TEXT LINK TO TEXT Ayayai Corporation, having recently issued a $20,083,600, 15-year bond issue, is committed to make annual sinking fund deposits of $607,200. The deposits are made on the last day of each year and yield a return of 10%. Click here to view factor tables Will the fund at the end of 15 years be sufficient to retire the bonds? Future value of an ordinary annuity Will funds be sufficient?

Explanation / Answer

Part 1

The company will receive =$21020

Future value of $122900 @ 5% for 11 years

($12290 * 1.71034) = $21020

Part 2

Future value of an ordinary annuity =$19292250

value of an ordinary annuity of $607200 at 10% for 15 years =($607200 * 31.77248) = 19292250

Will funds be sufficient? No

Deficiency = $791350 (20083600-19292250)

Part 3

Present value of deferred bonus = $61,476

Present value of 91000 @4%, 10 years = 91000 * 0.67556 = 61476

Which form of settlement should Walters accept?

Immediate bonus (because the present value of immediate bonus is higher than deferred bonus).

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