Question

Vicky starts a new job with an hourly pay of 7.15$. Suppose that her hourly pay increases by 5% each year. What will Vicky’s hourly pay be in 3 years

Answer 1

$8.28

Explanation:

This is a compound growth problem.

The formula is:

`F=P(1+r)^t`

Where F is the future amount (amount in 3 yrs)

P is the initial amount (here, it is 7.15)

r is the rate of growth, in decimal (5% means 5/100 = 0.05)

t is the time , in years ( t = 3)

Now, substituting, we find the hourly wage after 3 years:

`F=P(1+r)^t\\F=7.15(1+0.05)^3\\F=7.15(1.05)^3\\F=8.28`

Hence,

after 3 years, at 5% growth, the new hourly wage would be $8.28