A survey conducted in January,2007 found the median pay effective January 1,2007,for a clerk was $20,000 and the forecast rate of wage increases in the market for 2007 of was 5% and another 5% for 2008.If an employer chooses to follow a strategy of lagging the market by 3% for the plan year 2008,they will need to _____.
A) add 3% to $20,000
B) multiply the salary by 103%
C) multiply the salary by 108%
D) multiply the salary by 105% and then by 103%

Question

Quizplus · Accepted Answer

If the forecast rate of wage increases in the market for 2007 was 5% and another 5% for 2008, then the clerk's salary would increase by 5% in 2007 (to $21,000) and by another 5% in 2008 (to $22,050). 
However, if the employer chooses to lag the market by 3% in 2008, they will need to increase the clerk's salary by only 2% (5% - 3%) in that year. 
So the final salary effective January 1, 2008 would be $21,420, which is obtained by multiplying the salary by 105% (to get $22,050) and then multiplying that result by 103% (to lag the market by 3%). 
Therefore, the correct answer is D) multiply the salary by 105% and then by 103%.

A Survey Conducted in January,2007 Found the Median Pay Effective