Question

If a credit card holder has a low APR. The minimum monthly payments will be?

Answer 1

Answer:

Option B, the minimum monthly payments will be LOWER

Step-by-step explanation:

We can proof this by using hypothetical scenario below:

John has $1,500  with APR of 10% payable in 48 month equal instalment

Timmy has $1,500  with APR of 8% payable in 48 month equal instalment

Let us calculate monthly payment in each case

=pmt(rate,nper,-pv,fv)

rate is the monthly rate which APR/12

nper is 48

pv is the balance on the card which is $1,500

fv is the total monthly repayment which is unknown

John monthly payment=pmt(10%/12,48,-1500,0)=$38.04  

Timmy monthly payment=pmt(8%/12,48,-1500,0)=$ 36.62  

Since Timmy with a lower APR has a lower monthly payment, option B is correct