Geraldo's current salary is $40,000 per year. His annual pay raise is always a percent of his salary at the time.  What would his salary be if he got four consecutive 4% increases?

1 Answer | Add Yours

teachsuccess's profile pic

teachsuccess | High School Teacher | (Level 1) Educator Emeritus

Posted on

Geraldo's present salary is $40 000 ( this can also be referred to as present value or PV)

The formula for compound interest is PV( 1+ r) ^n

PV= present value

r  = annual interest rate

n = number of periods

So, using the formula:  PV (1+r) ^n

                                 = 40000 ( 1+ 0.04) ^ 4

                                 = 40000 (1.04)^4

                                 = 46794.34

If he got four consecutive 4% increases, his salary would be $46,794.34

We’ve answered 318,915 questions. We can answer yours, too.

Ask a question