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31 March, 10:25

If your starting salary were $40,000 and you received a 3% increase at the end of every year for 15 years, what will be the amount, in dollars, you will earn during your 16th year working there?

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  1. 31 March, 11:34
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    The salary during the 16th year will be US$ 62,318.70

    Step-by-step explanation:

    Starting salary = US$ 40,000

    Duration of the job contract = 15 years

    Salary increase rate = 3% compounded annually

    2. Let's find the future value of this starting salary after 15 years, using the following formula:

    FV = PV * (1 + r) ⁿ

    PV = Starting salary = US$ 40,000

    number of periods (n) = 15 (15 years compounded annually)

    Salary increase rate (r) = 3% = 0.03

    Replacing with the real values, we have:

    FV = 40,000 * (1 + 0.03) ¹⁵

    FV = 40,000 * (1.03) ¹⁵

    FV = 40,000 * 1.558

    FV = US$ 62,318.70

    The salary during the 16th year will be US$ 62,318.70
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