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Sivamani is attending an interview for a job and the company gave two offers to him.

Sivamani is attending an interview for a job and the company gave two offers to him.
Offer A: ₹20,000 to start with followed by a guaranteed annual increase of 6% for the first 5 years.
Offer B: ₹22,000 to start with followed by a guaranteed annual increase of 3% for the first 5 years.
What is his salary in the 4th year with respect to the offers A and B?
Solution :
Offer A: ₹20,000 to start with followed by a guaranteed annual increase of 6% for the first 5 years.
a = 20000, r = 0.06 and n = 5
Starting salary   = 20,000
Every year 6% of annual salary is increasing.
Starting salary  = 20000
Second year salary  = 20000 + 6% of 20000
=  20000(1 + 6%)
By continuing in this way, we get
4th year salary  = 20000(1 + 6%)3
=  20000(1.06)3
=  22820
Offer B: ₹22,000 to start with followed by a guaranteed annual increase of 3% for the first 5 years.
a = 22000, r = 0.03 and n = 5
Starting salary   = 22,000
Every year 3% of annual salary is increasing.
Starting salary  = 22000
Second year salary  = 22000 + 3% of 22000
=  22000(1 + 3%)
By continuing in this way, we get
4th year salary  = 22000(1 + 3%)3
=  22000(1.03)3

=  24040