(7 points) Consider two job offers with salaries that increase exponentially. a.

Question

(7 points) Consider two job offers with salaries that increase exponentially. a. For Job A, the salary for year 1 is $29,000 while the salary for year 2 will be $31,175. i. What is the 1-year growth factor for Job A? ii. This means that every year the salary for Job A increases by b. For Job B, the salary for Year 1 is 527,500 while the salary for Year 2 will be $28,600. i. What is the 1-year growth factor for Job B. ii. This means that every year the salary increases by c. You expect to keep this job for at least 5 years and you want to make as much money as possible over the time spent working. Which job should you take?

Explanation / Answer

a)

i)

1-year growth factor of job A = (31175/29000)

1-year growth factor of job A = 1.075

ii)

r=(1.075-1)*100 %

=>r = 7.5 %

this means that every year salary of job increases by 7.5 %

b)

1-year growth factor of job B = (28600/27500)

1-year growth factor of job A = 1.04

ii)

r=(1.04-1)*100 %

=>r = 4 %

this means that every year salary of job increases by 4 %

c) you should take job A, as it gives more income than job B

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