Question

Your starting salary was $45,000
After 6 years of work, your salary is $60,000
If inflation averaged 5.00% over the same time period,
What was your REAL annual percentage raise ?

Group of answer choices

31.67%

33.33%

-0.53%

-0.50%

-0.49%

35.00%

Answer 1

Annual average growth rate=((last value/First value)^(1/Time between 1st and last value)-1)*100

Annual Growth rate=((60000/45000)^(1/1)-1)*100

Annual Growth rate% = 33.33

Inflation over 6 years = (1+inflation %)^6-1

=(1+0.05)^6-1 = 34.01%

Real return = ((1+nominal return)/(1+inflation rate)-1)*100

Real return=((1+0.3333)/(1+0.3401)-1)*100

Real return = -0.50%