The merit increase will be 2.5%
Step-by-step explanation:
The score received for annual review is 3.4 and the merit increases are starting at 0.5% at a score of 2.6 and goes up 1% every 0.4 points.
Now, subtracting
And this is exactly 2 times of 0.4 points.
Hence, the merit increase will be 0.5%+1%+1%=2.5%