Question

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

Answer 1

Offer A

Starting salary ₹ 20,000

Annual increase = 6%

i.e. `₹  20,000 xx 6/100`

= ₹ 1200

At the end of I year salary = 20000 + 1200

= ₹ 21200

II year increase = `21200 xx 6/100` = ₹ 1272

At the end of II year salary = 21200 + 1272 = 22472

III year increase = `22472 xx 6/100` = 1348.32

At the end of III year, salary = 22472 + 1348 = 23820

∴ IV year salary = ₹ 23820

Offer B

Starting salary = ₹ 22,000

Annual increase = 3% = `3/100`

I year increase = `22000 xx 3/100` = ₹ 660

At the end of

I year salary = 22000 + 660

= ₹ 22660

II year increase = `22660 xx 3/100` = ₹ 679.8

At the end of II year, salary = ₹ 23339.80

III year increase = `23339.8 xx 3/100` = ₹ 700

At the end of III year, salary = ₹ 24039.80

∴ IV year salary = ₹ 24040

Salary as per Option A = ₹ 23820

Salary as per Option B = ₹ 24040

∴ Option B is better.