Jodi is promoted to salary level 2, receives a 4% cost-of-living increase and a 5% merit bonus. What is Jodi's new salary?
| Level | 1 | 2 | 3 |
|-------|---------|---------|---------|
| Salary | $62,000 | $75,000 | $84,000 |
Round to the nearest dollar.
Answer (2)
Determine Jodi's base salary: $75,000.
Calculate the 4% cost-of-living increase: 0.04 × 75000 = $3000 .
Add the cost-of-living increase to the base salary: 75000 + 3000 = $78000 .
Calculate the 5% merit bonus: 0.05 × 78000 = $3900 , and add it to the salary: 78000 + 3900 = $81900 .
Explanation
Determine Base Salary First, we need to determine Jodi's base salary from the table. Jodi is at salary level 2, which corresponds to a base salary of $75,000.
Calculate Cost-of-Living Increase Next, we calculate the cost-of-living increase. This is 4% of the base salary. So, we calculate 4% of $75,000: 0.04 × 75000 = 3000
Add Cost-of-Living Increase to Base Salary Now, we add the cost-of-living increase to the base salary: 75000 + 3000 = 78000
Calculate Merit Bonus Next, we calculate the merit bonus. This is 5% of the salary after the cost-of-living increase. So, we calculate 5% of $78,000: 0.05 × 78000 = 3900
Add Merit Bonus to Salary Now, we add the merit bonus to the salary after the cost-of-living increase: 78000 + 3900 = 81900
Final Answer Therefore, Jodi's new salary is $81,900.
Examples
Understanding salary increases is crucial in personal finance. For instance, if you invest a portion of your salary increase each year, you can calculate how much your investment will grow over time using compound interest formulas. This helps in planning for retirement or other long-term financial goals. Moreover, knowing how different types of increases (like cost-of-living adjustments and merit bonuses) affect your overall income enables you to make informed decisions about career moves and financial planning.
Jodi's new salary after a 4% cost-of-living increase and a 5% merit bonus is $81,900. This was calculated by first determining her base salary, then applying the increases step-by-step. The final new salary accounts for both increases accurately.
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