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24 March, 06:17

As a graduating senior, Chun Kumora of Manhattan, Kansas, is eager to enter the job market at an anticipated annual salary of $54,000. Assuming an average inflation rate of 3 percent and an equal cost-of-living raise, what will his salary possibly become in ten years? In 20 years? (Hint: Use Appendix A. 1.) To make real economic progress, how much of a raise (in dollars) does Chun need to receive next year and the year after?

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  1. 24 March, 09:21
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    a. Chun Kumora's salary in ten years=$72,571.48

    b. Chun Kumora's salary in twenty years=$97,530.01

    c. Amount of raise Chun needs to receive next year=$1,620

    d. Amount of raise Chun needs to receive the year after=$3,288.60

    Explanation:

    When choosing a career, there are various factors that need to be considered. One such factor is the salary. The expected salary should match with the salary average salary in the market. In our case, the annual salary is expected to be $54,000, but in order to estimate future salary requirements, the inflation rate has to be considered since the value of money reduces with time. Lets solve Chun Kumora's case as follows;

    a. Salary in ten Years

    The future value of the $54,000 salary in ten years while accounting for inflation can be expressed as;

    F. V=P. V (1+r) ^n

    where;

    F. V=future value

    P. V=present value

    r=inflation rate

    n=number of years

    In our case;

    F. V=unknown, yet to be determined

    P. V=$54,000

    r=3%=3/100=0.03

    n=10 years

    replacing;

    F. V=54,000 (1+0.03) ^10

    F. V=54,000 (1.03) ^10

    F. V=$72,571.48

    Chun Kumora's salary in ten years=$72,571.48

    b. Salary in twenty Years

    The future value of the $54,000 salary in twenty years while accounting for inflation can be expressed as;

    F. V=P. V (1+r) ^n

    where;

    F. V=future value

    P. V=present value

    r=inflation rate

    n=number of years

    In our case;

    F. V=unknown, yet to be determined

    P. V=$54,000

    r=3%=3/100=0.03

    n=20 years

    replacing;

    F. V=54,000 (1+0.03) ^20

    F. V=54,000 (1.03) ^20

    F. V=$97,530.01

    Chun Kumora's salary in twenty years=$97,530.01

    c.

    Amount of raise Chun needs to receive next year;

    In our case;

    F. V=unknown, yet to be determined

    P. V=$54,000

    r=3%=3/100=0.03

    n=1 year

    replacing;

    F. V=54,000 (1+0.03) ^1

    F. V=54,000 (1.03) ^1

    F. V=$55,620

    Raise=Amount next year-current amount

    where;

    Amount next year=$55,620

    current amount=$54,000

    replacing;

    Raise=56,620-54,000=$1,620

    d.

    Amount of raise Chun needs to receive the year after;

    In our case;

    F. V=unknown, yet to be determined

    P. V=$54,000

    r=3%=3/100=0.03

    n=2 year

    replacing;

    F. V=54,000 (1+0.03) ^2

    F. V=54,000 (1.03) ^2

    F. V=$57,288.60

    Raise=Amount next year-current amount

    where;

    Amount next year=$57,288.60

    current amount=$54,000

    replacing;

    Raise=$57,288.60-54,000=$3,288.60
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