**Understanding Fixed Rate Mortgages****Question:**Which of the following statements is true over the term of a fixed rate mortgage?- Although monthly payments are constant, the amount paid in interest is decreasing with each additional payment.- Although monthly payments are constant, the amount paid in interest is increasing with each additional payment.- Both monthly payments and the fraction paid in interest is constant over time.**Explanation:**In a fixed rate mortgage, the monthly payments remain constant throughout the term of the loan. However, the structure of these payments changes over time. Initially, a larger portion of your monthly payment goes towards paying interest, with a smaller fraction reducing the principal balance. As you continue to make payments, the portion of each payment allocated to interest decreases, while the portion that reduces the principal increases. This is due to the decreasing principal balance, which in turn lowers the interest calculated on the remaining principal. Therefore, the correct statement is: **Option 1:**- Although monthly payments are constant, the amount paid in interest is decreasing with each additional payment.This characteristic of fixed rate mortgages helps to reduce the principal more quickly in the later years of the mortgage, leading to less interest paid overall.

A mortgage is a formal arrangement wherein a bank, building society, or other lending institution…

Which of the following statements is true over the term of a fixed rate mortgage? Although monthly payments are constant, the amount paid in interest is decreasing with each additional payment Although monthly payments are constant, the amount paid in interest is increasing with each additional payment

Which of the following statements is true over the term of a fixed rate mortgage? Although monthly payments are constant, the amount paid in interest is decreasing with each additional payment Although monthly payments are constant, the amount paid in interest is increasing with each additional payment

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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