Questions: In five years, a salary of 38,000 per year with a 5 percent growth due to cost-of-living adjustment in the fifth year would be (Round your response to the nearest dollar.) The same salary, with a 1 percent growth due to cost-of-living adjustment compounded yearly, would be in five years. (Round your response to the nearest dollar.)

Solution Steps

The initial salary is $38,000. After five years, with a 5% growth applied only in the fifth year, the salary can be calculated as follows:

\[ \text{New Salary} = 38,000 \times (1 + 0.05) = 38,000 \times 1.05 \]

Calculating this gives:

\[ \text{New Salary} = 39,900 \]

For a 1% growth compounded yearly over five years, we use the formula for compound interest:

\[ \text{Future Salary} = 38,000 \times (1 + 0.01)^5 \]

Calculating this gives:

\[ \text{Future Salary} = 38,000 \times 1.0510100501 \approx 39,938.38 \]

Rounding to the nearest dollar:

\[ \text{Future Salary} = 39,938 \]

Final Answer