After graduating from college in 2010, Art Major\'s starting salary is $30757.00

Question

After graduating from college in 2010, Art Major's starting salary is $30757.00. Suppose Art Major has a cost of living adjustment (COLA) clause, i.e. an escalator clause in his labor contract so that he will be able to maintain this same level of purchasing power in real terms in 2011 and 2012. Using the information in the table below, how much will Art Major be earning in 2011 and 2012 if his salary keeps up with inflation? Round your answers to the nearest dollar Year 2010 2011 2012 CPI 103.77 104.29 113.86 What is Art Major's salary in 2011? Number What is Art Major's salary in 2012? Number

Explanation / Answer

Answer
Inflation-adjusted salry=(salary in x year/CPI of x year)*CPI of salary adjusted year
salary in 2011=(30757.00/103.77)*104.29=30911.1259=$30911

salary in 2012=(30757.00/103.77)*113.86=33747.6344=$33748

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