Which of the Following Statements Regarding a 15-Year (180-Month)$125,000,fixed-Rate Mortgage

question 121

Multiple Choice

Which of the following statements regarding a 15-year (180-month) $125,000,fixed-rate mortgage is CORRECT? (Ignore taxes and transactions costs. )

• A) The remaining balance after three years will be $125,000 less one third of the interest paid during the first three years.
• B) Because it is a fixed-rate mortgage,the monthly loan payments (which include both interest and principal payments)are constant.
• C) Interest payments on the mortgage will increase steadily over time,but the total amount of each payment will remain constant.
• D) The proportion of the monthly payment that goes towards repayment of principal will be lower 10 years from now than it will be the first year.
• E) The outstanding balance declines at a slower rate in the later years of the loan's life.

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Definitions:

Noncumulative Preferred Stock

A type of preferred stock on which the right to receive dividends ends if the dividends are not declared in the year they are earned.

Undeclared Dividends

These are dividends that have been earned by shareholders but have not yet been officially announced by the company.

Cumulative

An adjective describing quantities or changes that are added together sequentially over time.