1) Time value of money a) You are hired by the LUMS Employee Pension Fund (LEPF) as an analyst. The fund manages pension fund for all Lums employees. Ayesha Soomro, the CFO of LEPF is proposing a retirement until his or her death. She is asking you to crunch last salary at the time of decision making in presenting her proposal to the LEPF Board of Directors to aide her LEPF forecasts Pakistan's long-term inflation to be 2% per year. The fund is committed to offering 1% real growth in wages, so the annual nominal wage increase for all employees is 3% every year. The fund also forecasts long-term interest rates to stay at 6% per year. Ayesha has asked you to base your calculations for an average employee who joins LUMS at the age of 25 and retires at the age of 65 with 40 full years of service. The average annual salary is Rs.600,000 for a 25-year-old employee. 1 Furthermore, based on the latest Property and Casualty Insurance statistics in Pakistan, an average life-span of 80 year is a reasonable assumption for the Lahore urban population. You will assume that LEPF will pay the annual pension payment equal the employees last salary for 15 years. To make it beneficial for the employees, Ayesha suggests that LEPF should make the first pension payment at the time of retirement. 2 What fraction of the current salary will a 25-year-old have to contribute to the pension andanum15]