$300 raise every 6 mos. or $1000 annually?

No no no Cecil, perhaps you should have talked to someone who actually works for a living before you expounded on this problem. There is no need for further information from the questioner - the salary in question must be assumed to be the defined as $10,000 per year. In the absence of any other information there can be no assumptions that the $300 raise would apply to anything other than the defined salary. Therefore a $300 raise every six months is a raise to the annual salary. If you compare salary receipts every six months for five years, a $300 raise to your annual salary every six months gives you 5000, 5150, 5300, 5450…for a total of $56,750 after five years. An annual $1000 raise gives you six month receipts of 5000, 5000, 5500, 5500, 6000, 6000…for a total of $60,000 after five years. The boss offering the choice is testing his employee to see if the employee is (a) sufficiently addled to confuse the decision with information he has read about compound interest etc. in the business section of the newspaper, and (b) desperate enough for cash in hand, due perhaps to a cash consuming problem with drugs or gambling, to take the choice that provides the most instant gratification. Choosing the $300 raise to annual salary every six months is the wrong answer.

Well, perhaps you’re right, and perhaps Cecil is right. I tend to like Cecil’s answer, since it preassumes that the question (or rather the answer to the question) is interesting rather than trivial.

Still, it would have been better had the question been worded correctly.

From what I have read, this is what Cecil said. After he explained this, he went on to show the $300 in 1/2 year salary to explain how Marilyn came up with her $300 ahead, $700 ahead awnser.

Cecil states:

Would someone explain this to me. I understand it all except the line where Cecil states

Where does he get the two 600 dollar increases a year? Now taking the leap of faith that it means a $300 raise above the 6 month salary, two raises a year, thats $600 a year raise. Thats still $400 short of the $1000 raise. Where is this phantom $600 dollors coming from?


The facts expressed here belong to everybody, the opinions to me. The distinction is
yours to draw…

Omniscient; BAG

Yeah. What Omniscient said.

L.

Well, actually, it is sort of confusing.

You make $10,000 a year (poor bastard). At the beginning of the year, you have made $0 that year.

If you take the $1,000 option, at the end of the year, you are making $11,000, at the end of two years, $12,000, at the end of three years, $13,000 and so on.

If you take the $300 option, at the end of six months, you make $5,300 every six months, after a year, $5,600, after 18 months, $5,900, at the end of two years, $6,200, at the end of 30 months, $6,500, at the end of three years, $6,800. So, in your first year, you make $10,900. In your second year, $12,100. In your third year, $13,300, and so on.

So, you are better off in the long run to take the $300 every six months option, but I still don’t see where Cecil or Marilyn are getting their numbers.

L.

Whoops. Added wrong.

$300 option

End of year 1: $10,300
End of year 2: $11,500
End of year 3: $12,700
End of year 4: $13,900
End of year 5: $15,100

So, it isn’t until the end of year 5 that you’re actually doing better with the $300 every six months plan. And by then, I’d hope you had a better job.

L.

I think i figured this one out.

$300/6 mos option

End of Year one: $5000+$5300=$10300
End of year two: $5600+$5900=$11500
End of year three: $6200+$6500=$12700

$1000/12 mos option

End of year one: $10000
End of year two: $11000
End of year three: $12000

I’m pretty sure this works and is entirely acurate. i can’t for the life of me understand why this visual proof was so damn hard for these two journalists to show. Do they feel the need to try and articulate it. Thank god for us engineers.


The facts expressed here belong to everybody, the opinions to me. The distinction is
yours to draw…

Omniscient; BAG

Lamar,
Your point is confusing the point of when the raises take effect. If you say they take effect at the end of one period (defined as 6 months for the raise every 6 months and 1 year for the raise every year), then the figures work out as
$300 $1000
1st year: $10,300 $10,000
2nd year: $11,500 $11,000
etc.
so it is better from the very beginning. It doesn’t make much sense for you to receive a raise before you’ve even done any work.

TheDude

Damnit, I’m gonna figure this out someday.

income at $300 option $1,000 option
end of year 1 $10,300 $10,000
end of year 2 $11,500 $11,000
end of year 3 $12,700 $12,000
end of year 4 $13,900 $13,000
end of year 5 $15,100 $14,000
total $63,500 $60,000

So, it seems the $300 option is better all the way around. I’m not sure, though, because, as you can see, I em stoopid.

L.

(Trying UBB; hope it works).

Anyway, this confused me a bit at first also. However, I think I understand it now. Keep in mind that I’m basing all of this off Cecil’s proposition that the $300 is every half-year, and refers to a half-year raise, not a full year raise.

Based off this, if you get a raise of $300 at 6 mos, this is actually a $600 raise for the year (since you get $300 more each 6 mos).


            $300 option      $1000 option
           ________________________________
1/2 yr 1  |  $5000               $0
2/2 yr 1  |  $5300               $10000
1/2 yr 2  |  $5600               $0
2/2 yr 2  |  $5900               $11000
1/2 yr 3  |  $6200               $0
2/2 yr 3  |  $6500               $12000
           --------------------------------

Add these: $34500              $33000

I’m pretty sure that is the assumption that Cecil is making (since otherwise you cut the 6 mos in half, which easily makes it less attractive).

Wouldn’t it be better to take the money as soon as you can get it figuring that the value of $1 in the future will be less than what it is now.

Just wondering.