Question

Prestel currently makes $8.50 per hour. His boss has promised him a 15% raise in his hourly earnings.(a) Calculate 15% of $8.50. Why can’t Prestel get exactly a 15% raise? What would his boss actually give him?(b) After the raise, what is Prestel’s new salary? Show the calculation that leads to your answer.

Answer 1

The question provides the following information:

Hourly earnings: $8.50

Raise: 15%

QUESTION A

15% of $8.50 is calculated as follows:

$\Rightarrow\frac{15}{100}\times8.50=1.275$

Note that for money, the highest number of decimal places allowed is 2 decimal places. This means that for any calculations involving money, we round to the nearest hundredth. Therefore, it is not possible for Prestel to get exactly 15% because it has 3 decimal places and has to be rounded up to get the actual value.

1.275 rounded to the nearest hundredth is 1.28.

Therefore, Prestel's boss will give him $1.28.

QUESTION B

Prestel's new salary can be calculated to be:

$\Rightarrow8.50+1.28=9.78$

Prestel's new salary is $9.78.