Dan is promoted to salary level 2, receives a 2% cost-of-living increase and a 10% merit bonus. What is Dan's new salary?
Level | 1 | 2 | 3
Salary | $50,000 | $56,000 | $64,000
Answer (2)
Calculate the cost-of-living increase: 0.02 × 56000 = 1120 .
Calculate the salary after the cost-of-living increase: 56000 + 1120 = 57120 .
Calculate the merit bonus: 0.10 × 57120 = 5712 .
Calculate the new salary: 57120 + 5712 = 62832 . The new salary is 62832 .
Explanation
Initial Salary and Increases We are given that Dan's initial salary is $56,000. He receives a 2% cost-of-living increase and a 10% merit bonus. We need to calculate his new salary.
Cost-of-Living Increase First, let's calculate the cost-of-living increase. This is 2% of his initial salary: 0.02 × 56000 = 1120
Salary After Cost-of-Living Increase Now, we add this increase to his initial salary to find his salary after the cost-of-living increase: 56000 + 1120 = 57120
Merit Bonus Next, we calculate the merit bonus. This is 10% of his salary after the cost-of-living increase: 0.10 × 57120 = 5712
New Salary Finally, we add the merit bonus to his salary after the cost-of-living increase to find his new salary: 57120 + 5712 = 62832
Examples
Understanding salary increases is crucial in personal finance. For instance, knowing how cost-of-living adjustments and merit bonuses affect your income helps in financial planning and investment decisions. If you start with a salary of $50,000 and receive a 3% cost-of-living increase followed by an 8% merit bonus, you can calculate your new salary to better manage your budget and savings. This calculation ensures you accurately track your income growth and make informed financial choices.
Dan's new salary after a 2% cost-of-living increase and a 10% merit bonus is $62,832. First, his salary increases to $57,120 with the cost-of-living adjustment, and then adding the merit bonus results in the final amount. Therefore, the complete salary adjustment leads to a total of $62,832.
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