You are offered a job that pays ​$36,000 during the first​ year, with an annual increase of 10​% per year beginning in the second year.

Question

You are offered a job that pays ​$36,000 during the first​ year, with an annual increase of 10​% per year beginning in the second year. That​ is, beginning in year​ 2, your salary will be 1.1 times what it was in the previous year. What can you expect to earn in your fourth year on the​ job? Round your answer to the nearest dollar.

Answer 1

1st year: $36,000

2nd year: $36,000(1.1) = $39,600

3rd year: $39,600(1.1) = $43,560

4th year: $43,560(1.1) = $47,916

another way this could be obtained is: $36,000(1.1)^3

Answer 2

This is like a compound interest problem with an annual rate of 10%. There are 3 increases.

A = P(1 + r)ⁿ

A = 36000(1.1)³

A = 36000(1.331) = $47,916 (no rounding required).

1st yr $36,000

2nd yr 39,600

3rd yr 43,560

4th yr 47,916