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?
| Level | 1 | 2 | 3 |
|-------|---------|---------|---------|
| Salary | $46,000 | $50,000 | $54,000 |
Answer (2)
Calculate the cost-of-living increase: 0.02 × $54 , 000 = $1 , 080 .
Determine the salary after the cost-of-living increase: $54 , 000 + $1 , 080 = $55 , 080 .
Calculate the merit bonus: 0.05 × $55 , 080 = $2 , 754 .
Calculate Mary's new salary: $55 , 080 + $2 , 754 = $57 , 834 .
Explanation
Calculate the Cost-of-Living Increase First, we identify Mary's initial salary at level 3, which is $54,000. She then receives a 2% cost-of-living increase. To calculate the amount of this increase, we multiply her initial salary by 2% (or 0.02).
Determine the Increase Amount The cost-of-living increase is calculated as follows: 0.02 × $54 , 000 = $1 , 080 So, Mary's salary increases by $1,080 due to the cost-of-living adjustment.
Calculate Salary After Cost-of-Living Increase Next, we add this increase to her initial salary to find her salary after the cost-of-living adjustment: $54 , 000 + $1 , 080 = $55 , 080 Thus, Mary's salary after the cost-of-living increase is $55,080.
Calculate the Merit Bonus Amount Now, Mary receives a 5% merit bonus. This bonus is calculated based on her salary after the cost-of-living increase. To find the bonus amount, we multiply her adjusted salary by 5% (or 0.05).
Determine the Bonus Amount The merit bonus is calculated as follows: 0.05 × $55 , 080 = $2 , 754 So, Mary's bonus is $2,754.
Calculate the Final Salary Finally, we add the merit bonus to her salary after the cost-of-living increase to find her new final salary: $55 , 080 + $2 , 754 = $57 , 834 Therefore, Mary's new salary is $57,834.
Examples
Understanding percentage increases is crucial in many real-life financial situations. For example, when calculating annual raises, understanding cost-of-living adjustments, or determining investment returns, the ability to accurately compute percentage increases and bonuses is essential. In this case, Mary's salary increase demonstrates how these calculations affect an individual's income, which is a fundamental aspect of personal finance and economics. Knowing how to calculate these changes helps in budgeting, financial planning, and understanding the impact of economic factors on personal wealth.
Mary's new salary is calculated as follows: after a 2% cost-of-living increase from her original salary of $54,000, she receives an increase of $1,080, bringing her to $55,080. Then, adding a 5% merit bonus of $2,754 results in her final salary of $57,834.
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