Question

A union has successfully negotiated for its members to get 5% raises annually. If a unionmember currently has a salary of $72,000, what will his salary be in 10 years?If necessary, round your answer to the nearest cent.

Answer 1

Principal amount, P = $72,000

Annual raise (rate), r = 5% = 5/100 = 0.05

Number of years, n= 10

We can use the compoud interest approach to solve this problem.

`\begin{gathered} \text{ A = P(1+r)}^n \\ \text{Where A = Amount after n periods} \end{gathered}`

Substituting the values of P, r and n, we have

`\begin{gathered} \text{ A=72,000(1+0.05)}^(10) \\ A=72,000(1.05)^(10) \\ A=72,000(1.6288946) \\ A=117,280.413 \end{gathered}`

A = $117,280.41 (nearest cent)

Hence, his salary in 10 years = $117,280.41 (to nearest cent)