Which of the Following Statements Regarding a 30-Year Monthly Payment

question 78

Multiple Choice

Which of the following statements regarding a 30-year monthly payment amortized mortgage with a nominal interest rate of 10% is CORRECT?

• A) The monthly payments will increase over time.
• B) A larger proportion of the first monthly payment will be interest,and a smaller proportion will be principal,than for the last monthly payment.
• C) The total dollar amount of interest being paid off each month gets larger as the loan approaches maturity.
• D) The amount representing interest in the first payment would be higher if the nominal interest rate were 7% rather than 10%.
• E) Exactly 10% of the first monthly payment represents interest.

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Definitions:

Disposable Income

The total amount of money available to an individual or household for spending and saving after income taxes have been deducted.

Disposable Income

The income left over for personal spending after direct taxes have been subtracted from an individual’s gross income.

Consumption

The use of goods and services by households or individuals, typically relating to spending on products and services.

Permanent Income Hypothesis

A theory suggesting that a person's consumption at a point in time is determined not just by their current income but by their longer-term income expectations.