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Use a circular or hand saw to cut the wood on the mark you made for length.  Use safety goggles to make sure you don't get sawdust in your eyes. Saw in a well ventilated area. Using a chisel, drill and wood rasp, gouge out the wood within the rectangular area while being very careful not to split the wood.  Use a combination of all three tools to slowly remove the wood inside the rectangle until you have a rectangle shaped hole. Use sandpaper to smooth the area around the hole after you have finished. This grove will be centered and extend from the rectangle hole to the end of the wood.  Find and mark the center of the end of the wood, farthest from the string groove. Find and mark the center of the end of the rectangle hole, farthest from the string groove. Draw a straight line between the two marks. Use a drill, chisel, and hammer to carve a ¼ inch deep channel along the marked line. Sand the groove until completely smooth. Use varnish, wood stain, or another wood sealer to ensure the wood will be protected from the elements.  Wait until the glue has dried completely before applying a sealer.     {"smallUrl":"https:\/\/www.wikihow.com\/images\/thumb\/b\/b0\/Make-a-Homemade-Compound-Crossbow-Step-8.jpg\/v4-460px-Make-a-Homemade-Compound-Crossbow-Step-8.jpg","bigUrl":"\/images\/thumb\/b\/b0\/Make-a-Homemade-Compound-Crossbow-Step-8.jpg\/aid1845017-v4-728px-Make-a-Homemade-Compound-Crossbow-Step-8.jpg","smallWidth":460,"smallHeight":345,"bigWidth":"728","bigHeight":"546","licensing":"<div class=\"mw-parser-output\"><p>License: <a rel=\"nofollow\" class=\"external text\" href=\"https:\/\/creativecommons.org\/licenses\/by-nc-sa\/3.0\/\">Creative Commons<\/a><br>\n<\/p><p><br \/>\n<\/p><\/div>"}

Summary:
Saw off the extra wood. Cut the rectangle out of the wood. Cut the groove that holds the bolt. Protect the wood with sealer.