Question

Rose recently graduated in engineering. Her employer will give her a raise of $6500 per year if she passes the FE exam (Fundamentals of Engineering). (a) Over a career of 45 years, what is the present worth of the raise if the interest rate is 4%

Answer 1

Answer:

$134,680

Explanation:

Annual increase in salary (A) = $6,500

Time period (n) = 45 years

Interest rate (i) = 4% = 0.04

P= A[(1+i)^n - 1/i(1+i)^n]

P = 6,500[(1+0.04)^45 - 1 / 0.04(1+0.04)^45]

P = 6500[5.8412 - 1 / 0.04*5.8412]

P = 6500[4.8412/0.233648]

P = 134680.3738957748

P = $134,680

So, present worth of the raise if the interest rate is 4% is $134,680