Mr England has decided to join his company's employee pension scheme. Under the terms of the scheme his company will match the employee contributions i.e. for every 1 that Mr England pays into his pension, the company will also contribute 1. One year from today, Mr England will make his first annual payment of 2 per cent of his annual salary into the pension scheme. He will continue to do so every year until the day he retires. Mr England plans to retire in 35 years from today. You should assume that the pension has a guaranteed return of 8 per cent per year and that Mr England's annual salary in one years' time will be 60,000 and will increase at 2 per cent per year thereafter. Required: 1.1) Calculate the present value of the total pension contributions made on Mr England's behalf. Explain your workings and any assumptions made. A 20 Marks 1.2) Calculate the value of Mr England's pension fund on the date of his retirement. Explain your workings. 1.3) Outline the components making up the value of an annuity and explain how each component affects the present value. 10 Marks 20 Marks Part b) Farrell needs a 25-year, fixed-rate mortgage to buy a new home costing 300,000. Farrell has identified a mortgage bank that will lend him the money fit a 6 per cent annual percentage rate (APR) for this 300-month loan. However, the monthly payments on this loan would be 1,932.90 and Farrell can only afford 1,500 per month. Farrell has offered to pay 1,500 per month and then pay off any remaining loan balance at the end of the loan in the form of a single balloon payment. Required: 1.4) Calculate the present value of the 1,500 monthly payments made over the period of the loan. Explain your workings. 20 Marks 1.5) Calculate the value of the balloon payment required at the end of the loan period if Farrell makes monthly payments of 1,500. 10 Marks 1.6) Explain what is meant by APR and outline how the APR differs from the effective annual rate (EAR).