As a graduating senior, Chun Kumora of Manhattan, Kansas, is eager to enter the job market at an anticipated annual salary of $54,000.

As a graduating senior, Chun Kumora of Manhattan, Kansas, is eager to enter the job market at an anticipated annual salary of $54,000. Assuming an average inflation rate of 3 percent and an equal cost-of-living raise, what will his salary be in ten years? In 20 years? To make real economic progress, how much of a raise (in dollars) does Chun need to receive next year and the year after?

Solutions

Expert Solution

Future salary of chun with respect to inflation rate :

Future value = present value ( 1+ inflation rate) years

In 10 years:

= $54000 (1+3%)10

= $54000 × 1.3439 = $72572

In 20 years :

= $54000 ( 1.03)20

= $54000 × 1.806

= $97530

In order to make economic progress, chun must have given annual increment more than the inflation. i.e. 3% of $54,000 = $1620 and year after growth should be of $1,668.6 (3% of $55620)

$97530

Junaid answered 1 year ago

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