When Terry Retired from Caterpillar,he Received a Pension: Caterpillar Would

When Terry retired from Caterpillar,he received a pension: Caterpillar would pay him $50,000 the first year he was retired,with the amount increasing by 5 percent each year thereafter.If inflation turned out to be 2 percent each year,what would happen to the real value of Terry's pension?

A) It would increase each year by 5 percent.
B) It would increase each year by 3 percent.
C) It would decrease each year by 5 percent.
D) It would decrease each year by 3 percent.

Correct Answer:

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