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2 answers:
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Answer:
B. An increase in i, the interest rate, will create an increase in P, the monthly payment.
Step-by-step explanation:
We have the formula for the monthly payment as,
,
where P = monthly payment, i = rate of interest, PV = present value and n = time period.
Now, as i increase we get that (1+i) increases and so increases.
This gives us that, decreases and so
decreases
Therefore, increases.
So, we get that as i increases , the value of P will increase.
Hence, option B is correct.