As the number of monthly payments on a loan increases, the size of each payment ________ and the total interest paid over the life of the loan ________.
A) increases, decreases
B) decreases, stays the same
C) stays the same, decreases
D) decreases, increases

Question

Quizplus · Accepted Answer

As the number of monthly payments on a loan increases, the size of each payment decreases because the total amount to be repaid is spread out over a longer period of time. However, the total interest paid over the life of the loan increases because the loan balance is outstanding for a longer period, so interest accrues for a longer period of time.

As the Number of Monthly Payments on a Loan Increases