Mike is promoted to salary level 2, receives a 3% cost-of-living increase and a 10% merit bonus. What is Mike's new salary?
| Level | 1 | 2 | 3 |
|-------|---------|---------|---------|
| Salary| $54,000 | $60,000 | $68,000 |
Round to the nearest dollar.
Answer (2)
Calculate the cost-of-living increase: 0.03 × $60 , 000 = $1 , 800 .
Calculate the salary after the cost-of-living increase: $60 , 000 + $1 , 800 = $61 , 800 .
Calculate the merit bonus: 0.10 × $61 , 800 = $6 , 180 .
Calculate the final salary: $61 , 800 + $6 , 180 = $67 , 980 .
Explanation
Initial Salary Mike's starting salary at level 2 is $60,000. We need to calculate his new salary after a 3% cost-of-living increase and a 10% merit bonus.
Cost-of-Living Increase First, we calculate the cost-of-living increase. This is 3% of his initial salary: 0.03 × $60 , 000 = $1 , 800
Salary After Cost-of-Living Increase Next, we add this increase to his initial salary to find his salary after the cost-of-living adjustment: $60 , 000 + $1 , 800 = $61 , 800
Merit Bonus Now, we calculate the merit bonus, which is 10% of his salary after the cost-of-living increase: 0.10 × $61 , 800 = $6 , 180
Final Salary Finally, we add the merit bonus to his salary after the cost-of-living increase to find his new salary: $61 , 800 + $6 , 180 = $67 , 980
Conclusion Therefore, Mike's new salary, rounded to the nearest dollar, is $67,980.
Examples
Understanding percentage increases is crucial in personal finance. For example, if you invest money and it grows by a certain percentage each year, you can calculate your investment's future value. Similarly, understanding salary increases helps you plan your budget and financial goals. Knowing how bonuses and cost-of-living adjustments affect your income allows for better financial planning and decision-making.
Mike's new salary after a 3% cost-of-living increase and a 10% merit bonus is $67,980. This is calculated by first applying the cost-of-living increase to his initial salary, followed by adding the merit bonus to the new total. The final rounded salary is $67,980.
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