Question

Use the following information for problems 1 – 3. Suppose you sign a contract for an annual salary of $50,000 with a guaranteed raise of 5% each year.

1. Write your salary for the next n years as a geometric sequence in explicit form.

2. What will your salary be in year 5?

3. How much will you have earned in total salary by the end of your 10th year?

Answer 1

Initial salary = $50,000 .

Rate of raise = 5% each year.

Therefore, each next year salary would be 105% that is 1.05 times.

5% of 50,000 = 0.05 × 50000 = 2500.

Therefore raise is $2500 each year.

According to geometric sequence first term 50000 and common ratio 1.05.

Applying geometric sequence formula

`a_n = ar^(n-1)`

1)
`a_n = 50000(1.05)^(n-1)`

2) In order to find salary in 5 years we need to plug n=5, we get

`a_5 = 50000(1.05)^(5-1)= 50000(1.05)^4`

= 50000(1.21550625)

=$60775.3125.

3) In order to find the total salary in 10 years we need to apply sum of 10 terms formula of a geometric sequence.

`S_n = (a(1-r^n)/(1-r)`

Plugging n=10, a = 50000 and r= 1.05.

`S_10 = (50000(1-(1.05)^(10))/(1-1.05)`

`S_10 = (50000(0.050)^(10))/(0.05)`

= 628894.62678.

Therefore , you will have earned $ 628894.62678 in total salary by the end of your 10th year.