If you earn $1200 per month and you expect your earnings to increase by 10% per year, how much do you think you will be making in 5 years?

Question

Can you please help me solve this question with step by step answers for me to understand?

Answer 1

Hello Jessica,

 

When they say that your expected earnings will increase by 10% each year, you will need to calculate the annual earnings per year and then multiple that by the increase. You will keep adding the increase each year. 

 

• So for year #1, you make $1200 per month which equals $14,400 (1200 X 12 = 14400). You must include the 10% increase to your original annual salary: $14,400 X 10% = $1440. Your income will increase by $1440 bringing your total income to $15,840.
• For year #2, you will do the same 10% increase, but with your new salary from year #1. So $15,840 X 10% = $1584, increasing the total salary to $17,424
• Continue this process for each year up to 5, and your final salary should be $23,191.34.

 

Try to continue the process for year 3-5 to come up with the end salary I provided. I hope this helps!

 

Candice