Question

You are considering two different employment opportunities. Company A offers $34,000 the first year. During the next 3 years, the salary is guaranteed to increase 4.4% per year. Company B offers $32,000 the first year with a guaranteed increase of 3.5% per year. How does the salary for Company A compare to Company B in year 3?

A) A is $3209.40 lower
B) A is $3209.40 higher
C) B is $2000 lower
D) B is $2000 higher"

Answer 1

After calculating the salaries for Companies A and B with their respective annual increases, Company A's salary in year 3 is found to be $2,788.86 higher than Company B's. None of the provided options A through D correctly represent the salary difference calculated.

Step-by-step explanation:

The question involves calculating the salaries of two companies over a period of three years, accounting for annual percentage increases. To find out how the salary for Company A compares to Company B in year 3, we need to apply the growth rate to each company's initial salary for the subsequent years.

Calculating Company A's Salary

• Year 1: $34,000
• Year 2: $34,000 + (4.4% of $34,000) = $34,000 * 1.044 = $35,496
• Year 3: $35,496 + (4.4% of $35,496) = $35,496 * 1.044 = $37,058.06

Calculating Company B's Salary

• Year 1: $32,000
• Year 2: $32,000 + (3.5% of $32,000) = $32,000 * 1.035 = $33,120
• Year 3: $33,120 + (3.5% of $33,120) = $33,120 * 1.035 = $34,269.20

Now, to compare Company A's salary to Company B's in year 3, we subtract the salaries:

Company A's Year 3 Salary - Company B's Year 3 Salary = $37,058.06 - $34,269.20 = $2,788.86

The result is that Company A's salary is $2,788.86 higher than Company B's salary in the third year. This means none of the options A, B, C, or D provided in the initial question are correct. The right answer is not given among the options.