Your monthly finance charge is based on your interest rate and your balance. The higher your interest rate, the higher your finance charge will be.
True
False
Answer (2)
The finance charge is based on interest rate and balance.
Higher interest rate leads to a higher finance charge, assuming the balance remains the same or increases.
Therefore, the statement is true.
The final answer is T r u e .
Explanation
Understanding the Problem The statement says that your monthly finance charge is based on your interest rate and your balance, and that the higher your interest rate, the higher your finance charge will be. This assumes that the balance remains the same or increases.
Analyzing the Relationship The finance charge is calculated by multiplying the interest rate by the balance. If the interest rate increases and the balance stays the same or increases, the finance charge will increase.
Conclusion Therefore, the statement is true.
Examples
When you borrow money, like with a credit card, you're charged interest. The higher the interest rate, the more you'll pay in finance charges each month, assuming your balance stays the same. For example, if you have a credit card balance of $100 and your interest rate increases from 10% to 15%, your finance charge will increase from $10 to $15. This is why it's important to pay off your balance as quickly as possible to avoid paying high finance charges.
The statement is true: a higher interest rate results in a higher finance charge, assuming the balance remains constant or increases. This is due to the calculation method for finance charges, which multiplies the balance by the interest rate. Therefore, if the interest rate goes up, so does the amount you pay in finance charges each month.
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