Jing is having some building work done at her apartment and has been offered different options to make payments: For answering the following questions, no specific calculations are needed - just an explanation. Option A: Pay one lump sum of $12,000 now. Option B: Pay two equal payments of $6,000. One paid now and one payment of $6,000 in six-months' time. a) In real value terms is Option B better than Option A if we know there is going to be inflation? Explain. [2 marks] b) What if there was a third option: Option C: Pay 12 equal payments. The first is $1,000 today and each payment after today will be adjusted for inflation. What are the costs of Option C in nominal and real terms? Explain.

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Option B vs Option A with Inflation a In real value terms Option A might be better than Option B if ... View the full answer