Question

Miles signed a 6-year contract for a new job. Her starting salary is $45K per year, and the salary increases 3.5% each year if a corporate review of her work deems it satisfactory. What is her salary in 6 years, to the nearest dollar?

Answer 1

To solve this problem, we can use the formula for the future value of an annuity:

FV = Pmt x [(1 + r)n - 1] / r

where:

FV is the future value of the annuity (Miles' salary in 6 years)

Pmt is the payment made each period (Miles' starting salary)

r is the interest rate per period (3.5%)

n is the number of periods (6 years)

Substituting the values, we get:

FV = 45,000 x [(1 + 0.035)^6 - 1] / 0.035

FV = 45,000 x 1.243 - 1 / 0.035

FV = 45,000 x 31.60

FV = 1,422,000

Therefore, Miles' salary in 6 years, to the nearest dollar, is $1,422,000.