Presented below are three unrelated situations.
(a) Sugarland Company recently signed a lease for a new office building, for a lease period of 20 years. Under the lease agreement, a security deposit of $20,000 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 expires?
(b) Overland Corporation, having recently issued a $30 million, 10-year bond issue, is committed to make annual sinking fund deposits of $2,000,000. The deposits are made on the last day of each year and yield a return of 6%. Will the fund at the end of 10 years be sufficient to retire the bonds? If not, what will the deficiency be?
(c) Under the terms of his salary agreement president Jose Rodriguez has an option of receiving either an immediate bonus of $50,000, or a deferred bonus of $80,000 payable in 10 years. Ignoring tax considerations, and assuming a relevant interest rate of 6%, which form of settlement should Rodriquez accept?