Under the NBA deferred compensation plan, payments made at the end of each year accumulate up to retirement and then retirees are given two options. Option 1 allows the retiree to select the amount of the annual payment to be received, and option 2 allows the retiree to specify over how many years payments are to be received. Assume Hardaway has had $7,700 deposited at the end of each year for 30 years, and that the long-term interest rate has been 7%. Required: a. How much has accumulated in Hardaway's deferred compensation account? b. How much will Hardaway be able to withdraw at the beginning of each year if he elects to receive payments for 16 years? c. How many years will Hardaway be able to receive payments if he chooses to receive $82,000 per year at the beginning of each year?
Under the NBA deferred compensation plan, payments made at the end of each year accumulate up to retirement and then retirees are given two options. Option 1 allows the retiree to select the amount of the annual payment to be received, and option 2 allows the retiree to specify over how many years payments are to be received. Assume Hardaway has had $7,700 deposited at the end of each year for 30 years, and that the long-term interest rate has been 7%. Required: a. How much has accumulated in Hardaway's deferred compensation account? b. How much will Hardaway be able to withdraw at the beginning of each year if he elects to receive payments for 16 years? c. How many years will Hardaway be able to receive payments if he chooses to receive $82,000 per year at the beginning of each year?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Under the NBA deferred compensation plan, payments made at the end of each year accumulate up to retirement and then retirees
are given two options. Option 1 allows the retiree to select the amount of the annual payment to be received, and option 2 allows the
retiree to specify over how many years payments are to be received. Assume Hardaway has had $7,700 deposited at the end of each
year for 30 years, and that the long-term interest rate has been 7%.
Required:
a. How much has accumulated in Hardaway's deferred compensation account?
b. How much will Hardaway be able to withdraw at the beginning of each year if he elects to receive payments for 16 years?
c. How many years will Hardaway be able to receive payments if he chooses to receive $82,000 per year at the beginning of each
year?
Note: For all requirements, round your final answers to the nearest whole number. Use tables, Excel, or a financial calculator. (FV
of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
a. Balance in fund
b. Withdrawl amount
c. Receive Payments
Years
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