Question 698913: Hi. I kind of understand how a total salary amount over a certain period of years with a fixed annual increase using arithmetic series is done but how does one do this if the annual rate of increase is a percentage? e.g. What would be the total amount of a salary that starts at $20,000 per year at an annual increase of 5% over 10 years? Thank you. Paul Stone
Found 2 solutions by josmiceli, MathTherapy:
Answer by josmiceli(19441)   (Show Source):
Answer by MathTherapy(10555)  (Show Source):
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Hi. I kind of understand how a total salary amount over a certain period of years with a fixed annual increase using arithmetic series is done but how does one do this if the annual rate of increase is a percentage? e.g. What would be the total amount of a salary that starts at $20,000 per year at an annual increase of 5% over 10 years? Thank you. Paul Stone
This is the equivalent of asking one to determine the future value, after 10 years, of $20,000, which is compounded annually, at a rate of 5%.
The future value formula,  can be used, with A being the future value, or value after 10 years, P = present value, or $20,000, r = rate of interest, or 5% (.05), m being the amount of compounding periods per year, and t being the time, in years (10)
Therefore, becomes:
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A, or amount in 10 years = 20000(1.628894627), or $
You can do the check!!
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