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 $7,200 deposited at the end of each year for 30 years, and that the long-term interest rate has been 6%.
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 15 years?
c. How many years will Hardaway be able to receive payments if he chooses to receive $77,000 per year at the beginning of each year?
