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 Rodman has had $6,000 deposited at the end of each year for 30 years, and that the long-term interest rate has been 8%.
Required:
a. How much has accumulated in Rodman's deferred compensation account?
b. How much will Rodman be able to withdraw at the beginning of each year if he elects to receive payments for 15 years?
c. How many years will Rodman be able to receive payments if he chooses to receive $65,000 per year at the beginning of each year?

Question

Quizplus · Accepted Answer

The Answer of 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 Rodman has had $6,000 deposited at the end of each year for 30 years, and that the long-term interest rate has been 8%.
Required:
a. How much has accumulated in Rodman's deferred compensation account?
b. How much will Rodman be able to withdraw at the beginning of each year if he elects to receive payments for 15 years?
c. How many years will Rodman be able to receive payments if he chooses to receive $65,000 per year at the beginning of each year?

Under the NBA Deferred Compensation Plan, Payments Made at the End