Upon graduating from college this year,you expect to earn $25,000 per year. If you get your MBA,in one year you can expect to start at $35,000 per year. Over the year,inflation is expected to be 5 percent. In today's dollars,how much additional (less)money will you make from getting your MBA (to the nearest dollar)in your first year?
A)$10,000
B)$8,750
C)$8,333
D)-$2,462
E)$9,524

Question

Quizplus · Accepted Answer

Without getting an MBA, the expected salary is $25,000. With an MBA, the expected salary is $35,000, which is a difference of $10,000. However, due to inflation, the value of money decreases by 5%, so in today's dollars, the additional money made from getting an MBA is $10,000 / (1+0.05) = $9,523.81, which rounds to $8,333. Therefore, the best choice is C.

Upon Graduating from College This Year,you Expect to Earn $25,000