Assume Your Current Mortgage Payment Is $900 Per Month

question 61

Multiple Choice

Assume your current mortgage payment is $900 per month. If you begin to pay $1,000 per month (with the extra $100 per month going to principal) , which of the following will be TRUE?

• A) The total paid (principal and interest) will increase with $1,000 monthly payment compared to $900 monthly payments.
• B) The total principal paid will decrease with $1,000 monthly payment compared to $900 monthly payments.
• C) The mortgage balance will decrease faster with $1,000 monthly payment compared to $900 monthly payments.
• D) The total interest expense will increase with $1,000 monthly payment compared to $900 monthly payments.

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Definitions:

Current Ratio

A financial ratio indicating a firm's capability to meet its short-term liabilities using its available assets.

Short Term Liabilities

Financial obligations that are due within one year or within the normal operating cycle of the business.

Short Term Assets

Assets expected to be converted into cash or used within one year or one business cycle, whichever is longer.

Balance Sheet Columns

The sections in a balance sheet that typically include assets, liabilities, and shareholders' equity.