16
QuizMultiple Choice

Paying Off Debt

Question 16 • Personal Finance - EL3403

In general, reducing the present value (PV) of a credit card while keeping the number of periods (n) and interest rate (i) the same will _____.

Answer
A
decrease 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

For a fixed interest rate and number of payment periods, the present value is the amount being repaid through the monthly payments. If the present value decreases while the other factors stay the same, each monthly payment must also decrease. Therefore, the correct choice is “decrease the monthly payment (P).”

AI-written and checked against the verified answer.

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