1] Franco, a twenty-ve year old, has just started a job as an officer in the Swiss Navy. He plans that he will earn [in real, net terms] $25,000 per annum for ten years, $45,000 for the ten years after that, and $55,000 for the last twenty years of his career. He expects to live to the age of eighty-ve. The current value of Franco's assets is estimated at $3,000. a] Assuming a zero real interest rate and no superannuation payments, what is Franco's level of consumption per year if he intends to consume a constant amount over the rest of his life? b] What key assumption needs to be made so that Franco can consume this amount in the early stages of his career? c] How would the introduction of a guaranteed superannuation benet affect Franco's consumption and savings decisions? 2] Consider Calvin. He thinks of the world as consisting of today and his destiny. Calvin has income of Yt today and is destined to get income of Yd. Because his friend Hobbes requires more tuna, Calvin's desired consumption today [Ct] exceeds the income he receives today. Unfortunately for Calvin, he cannot borrow today because an acquaintance, Susie, has informed everyone that Calvin is a bad credit risk. a) Use a diagram to show both Calvin's consumption today and his destined consumption. b] Now assume that Mrs Wormwood is the Minister of Finance and introduces a compulsory savings scheme. Use your diagram from a] to show how this policy affects the welfare of Calvin. Is he better or worse off