What Will Happen If You Make Only the Minimum Payment

question 14

Multiple Choice

What will happen if you make only the minimum payment on your credit card bill each month?

• A) It will shorten your repayment time.
• B) The bank will cancel your credit card.
• C) Your interest rate will go up each month.
• D) You will be charged a finance fee each month.

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Definitions:

Interest Rate Price Risk

The risk of losses in the values of financial instruments due to fluctuations in interest rates.

Original Maturity

This refers to the duration from the issuance of a bond or other fixed-income security until its due date.

Default Risk

The risk that a borrower fails to make the required payments on their debt obligation.

Canada Call Feature

A special feature on certain bonds that allows the issuer to redeem the bond before maturity in the Canadian market.