Solve the problem A basketball player signs a contract with

Solve the problem. A basketball player signs a contract with a starting salary of $810,000 per year and an annual increase of 4.5% beginning in the second year. What will the athlete\'s salary be, to the nearest dollar, in the sixth year? $1,009,407 $1,010,001 $1,011,764 $1,008,037

Solution

There is a compounding factor of 4.5 % in the salary of the basketball player from the 2nd year onwards. Therefore, his salary in the nth year will be P( 1 +r)^n-1 where P is the starting salary and r is the rate of increase in decimals. Therefore, the basketball player\'s salary in the 6th year will be 810000( 1 + 0.045)⁵ = 810000(1.045)⁵ = 810000( 1.246181938)= $ 1009407.37 or, $ 1009407( on rounding off to the nearest Dollar). Thus, answer is correct.