Question

Fred Walters used to make a semi-monthly salary of $2500. The company he works for is under new management, which pays its employees bi-weekly. What will his new biweekly salary be?

A) $1250
B) $2000
C) $2500
D) $3000
E) $4000

Answer 1

Fred's new biweekly salary needs to equal his annual salary from when he was paid semi-monthly. Dividing his semi-monthly salary to fit a bi-weekly payment schedule gives an amount that is not an exact match to the options. The correct answer is the closest amount without exceeding it, which is Answer A) $1250.

Step-by-step explanation:

Fred Walters previously made a semi-monthly salary of $2500. Semi-monthly means twice a month, so annually, he would earn $2500 x 2 x 12 = $60,000. Under the new management, employees are paid bi-weekly, which indicates that they are paid every two weeks. There are 52 weeks in a year, thus Fred will receive 52 / 2 = 26 bi-weekly paychecks in a year.

To calculate Fred's new biweekly salary, we divide his annual salary by the number of bi-weekly periods: $60,000 / 26 = $2307.69. The closest option to this amount is $2500 per pay period which can't be correct since it's the same as his semi-monthly pay and would result in a higher annual salary than he previously had. The second closest value, $2000, would mean he's receiving less annually than before. Therefore, his new biweekly salary is approximately $2307.69, but since this is not one of the choices offered, we will need to choose the option closest to this value without going over, which is Answer A) $1250.