Question

A person investigating to employment opportunities. They both have a beginning salary of $42,000 per year. Company A offers an increase of $1000 per year. Company B offers 7% more than during the preceding year. Which company will pay more in the sixth year? what will company A pay? and what will company B pay?

Answer 1

qANSWER

Company B will pay more

Company A =

Step-by-step explanation

Both companies start by paying $42,000 per year.

Company A offers an increase of $1000 per year.

This means that after n years, he would have earned:

Earnings = 42000 + 1000n

where n = number of years after the first year

So, after 6 years, he would have worked 5 years after the first, so his earnings would be:

Earnings = 42000 + 1000(5) = 42000 + 5000

Earnings = $47000

Company B offers 7% more than the previous year. That means that his earnings are compounded.

His earnings can then be represented as:

`\text{ Earnings = P(1 + }(r)/(100))^t`

where P = initial salary = $42000

r = interest rate = 7%

t = number of years spent = 6 years

Therefore, his earnings after the 6th year will be:

`\begin{gathered} \text{ Earnings = 42000(1 + }(7)/(100))^6 \\ \text{ Earnings = 42000(1 + 0.07)}^6=42000(1.07)^6 \\ \text{ Earnings = }42000\cdot\text{ 1.501} \\ \text{Earnings = \$63042} \end{gathered}`

He would have earned $63042.

Therefore, Company B will pay more.