Mary is promoted to salary level 3, receives a 2% cost-of-living increase and a 5% merit bonus. What is Mary's new salary?
Answer (2)
Calculate the cost-of-living increase: 0.02 × $54 , 000 = $1 , 080 .
Add the cost-of-living increase to the initial salary: $54 , 000 + $1 , 080 = $55 , 080 .
Calculate the merit bonus: 0.05 × $55 , 080 = $2 , 754 .
Add the merit bonus to the salary after the cost-of-living increase: $55 , 080 + $2 , 754 = $57 , 834 .
Explanation
Initial Salary Mary's starting salary at level 3 is $54,000. We need to calculate her new salary after a 2% cost-of-living increase and a 5% merit bonus.
Cost-of-Living Increase First, let's calculate the cost-of-living increase. This is 2% of her initial salary: 0.02 × $54 , 000 = $1 , 080
Salary After Cost-of-Living Increase Now, we add this increase to her initial salary to find her salary after the cost-of-living adjustment: $54 , 000 + $1 , 080 = $55 , 080
Merit Bonus Calculation Next, we calculate the merit bonus, which is 5% of her salary after the cost-of-living increase: 0.05 × $55 , 080 = $2 , 754
Final Salary Calculation Finally, we add the merit bonus to her salary after the cost-of-living increase to find her new salary: $55 , 080 + $2 , 754 = $57 , 834
Conclusion Therefore, Mary's new salary is $57,834.
Examples
Understanding salary increases and bonuses is crucial in personal finance. For example, if you're negotiating a job offer or evaluating a promotion, knowing how percentage increases and bonuses affect your overall compensation helps you make informed decisions. This calculation demonstrates how a base salary grows with cost-of-living adjustments and performance-based bonuses, providing a clear picture of your potential earnings and financial growth.
Mary's new salary after a 2% cost-of-living increase and a 5% merit bonus is $57,834. This is calculated by first adding her cost-of-living increase of $1,080 to her initial salary of $54,000, then calculating and adding her merit bonus of $2,754. Thus, her final salary reflects both adjustments.
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