6
QuizMultiple Choice

Paying Off Debt

Question 6 • [PERFIN] Personal Finance, Sem 2 (26-27)

In general, reducing the monthly payment (P) of a credit card but keeping the interest rate (i) and present value (PV) the same will __________.

Answer
A
decrease the number of periods (n) needed to pay off the debt
B
increase the number of periods (n) needed to pay off the debt
C
eliminate the number of periods (n) needed to pay off the debt
D
have no effect on the number of periods (n) needed to pay off the debt

Explanation

With the interest rate and starting balance unchanged, a smaller monthly payment pays down the debt more slowly. More monthly payments are therefore needed to reach a zero balance, so the number of periods increases. The correct choice is “increase the number of periods (n) needed to pay off the debt.”

AI-written and checked against the verified answer.

Previous
Next