1.Suppose a 25 year old wanted to retire on their 70 birthday (35 years of working) with an annual income (taken out of their retirement savings at the beginning of each year) of $100,000 at today's prices.They believe that the return they will earn on their retirement savings while in retirement is 3% (EAR) in real terms.They expect to live to the end of their 90^th year (21 years of retirement) and want to leave $100,000, at today's prices, for their heirs to put on a funeral party (on 91^st birthday) and then travel to various places around the world to spread their ashes.

Determine the real amount (at today's prices) the individual would need to save each year in order accumulate this retirement account amount (part a.i.).Assume that over their working life they invest the funds at the end of each year.Assume that they believe they will earn a real return of 5% (EAR).

i.What would the annual contribution amount be (at today's prices) given the retirement account balance required in part a(i) assuming they started contributing at the end of the year following their 25^th birthday?

ii.Given this same required retirement account balance (a.i.) assumptions), what would the annual amount be assuming the return they earned was only expected to be 4% (EAR) in real terms?

iii.Given this retirement account balance (a.i. assumptions), what would the annual amount be assuming they waited and started contributing at age 35? (assume real EAR of 5%)?

iv.What would the first contribution need to be if the contribution where to increase each year by 2% in real terms (to account for real salary increases) assumingthe retirement account balance required in part a(i), the first contribution at the end of the year following their 25^th birthday and an expected real return of 5% EAR?