An engineer earned $23,600 per year when he began his career. Thirty years later

Question

An engineer earned $23,600 per year when he began his career. Thirty years later, his annual salary was $99,900. The inflation index over this same period grew from 428.55 to 1,059.79. What was his real annual salary increase? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Real annual increase % What is his current salary in real terms? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Real salary

Explanation / Answer

1)

First salary = 23600

salary after 30 years = 99900

Let r be real growth and i be inflation per year

23600 (1+r)30 * (1+i)30 = 99900

(1+i)30   = 1059.79/ 428.55

   = 2.473

(1+r)30 = 99900/(2.473*23600)

r = 1.81 %

2)

Real salary = 23600 * (1+0.0181)30

   = 40396.82

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