14
QuizMultiple Choice

Paying Off Debt

Question 14 • [PERFIN] Personal Finance, Sem 2 (26-27)

Michelle has four credit cards with the balances and interest rates listed below. She wants to pay off her credit cards one at a time, based on the interest rate. In which order should Michelle pay off her credit cards?Credit CardBalanceAPR#1$4,380 17%#2$1,365 19%#3$2,480 23%#4$5,000 15%

Answer
A
3,2,1,4
B
1,2,3,4
C
2,4,3,1
D
4,1,3,2

Explanation

To pay the cards off based on interest rate, Michelle should tackle the highest APR first and continue in descending order. The rates are: Card #3 at 23%, Card #2 at 19%, Card #1 at 17%, and Card #4 at 15%. Thus the correct order is 3, 2, 1, 4, which is choice A.

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