Suppose that in a certain definition benefit pension plan
a) Employees work for 45 years earning wages that increase at a real rate of 2%
b) They retire with a pension equal to 70% of their final salary. This pension increase the rate of inflation minus 1
c) The pension is received for 18 year
d) The pension funds income is invested in bonds which earn the inflation rate plus 1.5%
Estimated the percentage of an employee%u2019s salary that must be contributed to the pension plan if it is to remain solvent
Hint does all calculation in real rather than nominal dollar