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

question 133

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 the outstanding balance declines over time,the monthly payments will also decline over time.
• 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 faster rate in the later years of the loan's life.

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Definitions:

Average Accounting Return

A financial ratio that compares the average net income to the average investment made in a company.

Payback Method

A method in capital budgeting that measures the duration needed to recover an investment's expenses.

Short-Term Projects

Initiatives or tasks that are expected to be completed or yield results within a relatively brief period, typically less than one year.

Risk Level

An indicator of the level of risk and possible monetary loss associated with making an investment choice.