Which of the following statements regarding a 30-year monthly payment amortized mortgage with a nominal interest rate of 10% is CORRECT? 1. Exactly 10% of the first monthly payment represents interest. 2. The total dollar amount of principal being paid off each month gets smaller as the loan approaches maturity. 3. A smaller proportion of the last monthly payment will be interest, and a larger proportion will be principal, than for the first monthly payment. 4. The monthly payments will decline over time. 5. The amount representing interest in the first payment would be higher if the nominal interest rate were 7% rather than 10%.
Which of the following statements regarding a 30-year monthly payment amortized mortgage with a nominal interest rate of 10% is CORRECT? 1. Exactly 10% of the first monthly payment represents interest. 2. The total dollar amount of principal being paid off each month gets smaller as the loan approaches maturity. 3. A smaller proportion of the last monthly payment will be interest, and a larger proportion will be principal, than for the first monthly payment. 4. The monthly payments will decline over time. 5. The amount representing interest in the first payment would be higher if the nominal interest rate were 7% rather than 10%.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Which of the following statements regarding a 30-year monthly payment amortized mortgage with a nominal interest rate of 10% is CORRECT?
1. Exactly 10% of the first monthly payment represents interest.
2. The total dollar amount of principal being paid off each month gets smaller as the loan approaches maturity.
3. A smaller proportion of the last monthly payment will be interest, and a larger proportion will be principal, than for the first monthly payment.
4. The monthly payments will decline over time.
5. The amount representing interest in the first payment would be higher if the nominal interest rate were 7% rather than 10%.
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