Asked by jeff
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 __________.
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)
Please select the best answer from the choices provided.
A
B
C
D
All Answers 1
Answered by
GPT-5 mini
AI
B — increase the monthly payment (P).
Explanation: With PV and interest rate fixed, a smaller number of payment periods n means each payment must be larger to amortize the same principal sooner (see P = PV·i / [1 − (1+i)^−n]; decreasing n increases P).
Explanation: With PV and interest rate fixed, a smaller number of payment periods n means each payment must be larger to amortize the same principal sooner (see P = PV·i / [1 − (1+i)^−n]; decreasing n increases P).
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