On a related topic, your supervisor tells you that you can expect annual increas
ID: 2507014 • Letter: O
Question
On a related topic, your supervisor tells you that you can expect annual increases of 4% during your first six years of employment if your performance meets expectations. Using the Consumer Price Index, you find that inflation has averaged 1.75% per year during the past six years. Assuming that inflation continues at the rate of 1.75% per year during the next six years, and assuming that your job perfomrance meets expectations, find the present value of your salary between now and six years from now. Resist rounding until you are finished with your calculations. Round your answer to the nearest dolalr.
Explanation / Answer
theway to solve this que is first getting increased value of salary and then deflating it to present.
let present salary be s.
so salary at 6th year = s*(1+0.04)^6
= 1.26532s
deflating it 1.26532s/(1+0.0175)^6
= 1.140s
hence increase is 14%