Question

Brian owns a house with payments fixed at $1,000 per month. Cheryl rents an apartment for $1,000 per month and her rent increases each year with the overall rate of inflation. If inflation over the next year is 5 percent, what will each of them pay per month in a year's time?

A. Brian and Cheryl will both pay $1,000.

B. Brian will pay $1,000 and Cheryl will pay $1,050.

C. Brian will pay $1,050 and Cheryl will pay $1,000.

D. Brian and Cheryl will both pay $1,050.

Answer 1

A. Brian and Cheryl will both pay $1,000.

Answer 2

Answer: B. Brian will pay $1,000 and Cheryl will pay $1,050.

Explanation:

Because Brian owns a home with fixed payments, he is protected from inflation. Cheryl rents an apartment and her rent follows inflation.