Question

During a job interview, Pam Thompson is offered a salary of $32,000. The company gives annual raises of 4 percent. What would be Pam’s salary during her fifth year on the job?

Answer 1

Given current salary= 32000

First increment will occur at the begining of 2nd year

Hence at starting of 2nd year salary for 2nd year= 32000*(1+4%)

Second increment will occur at the begining of 3rd year

Hence at starting of 3rd year for 3rd year= 32000*(1+4%)*(1+4%)

third increment will occur at the begining of 4th year

Hence at starting of 4th year for 4th year= 32000*(1+4%)*(1+4%)*(1+4%)

Fourth increment will occur at the begining of 5th year

Hence at starting of 5th year for 5th year= 32000*(1+4%)*(1+4%)*(1+4%)*(1+4%)= 32000*(1+4%)^4= 32000*1.04^4

= 32000*1.1698586

=37435.474

Hence the salary for the 5th year of job will be the salary determined after the fourth increment i.e at the begining of 5 th year hence the salary will be 37435.474