13
QuizMultiple Choice

Paying Off Debt

Question 13 • [PERFIN] Personal Finance, Sem 2 (26-27)

In general, reducing the number of periods (n) used to pay off credit card debt but keeping the present value (PV) and interest rate (i) the same will __________.

Answer
A
reduce the monthly payment (P)
B
increase the monthly payment (P)
C
eliminate the monthly payment (P)
D
have no effect on the monthly payment (P)

Explanation

With the present value and interest rate fixed, the debt must still be repaid in full. Paying it off over fewer periods means each monthly payment has to be larger, so the monthly payment increases.

AI-written and checked against the verified answer.

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