Which of the Following Statements Regarding a 20-Year (240-Month) $225,000

question 28

Multiple Choice

Which of the following statements regarding a 20-year (240-month) $225,000, fixed-rate mortgage is CORRECT? (Ignore taxes and transactions costs.)

• A) The outstanding balance declines at a slower rate in the later years of the loan's life.
• B) The remaining balance after three years will be $225,000 less one third of the interest paid during the first three years.
• C) Because it is a fixed-rate mortgage, the monthly loan payments (which include both interest and principal payments) are constant.
• D) Interest payments on the mortgage will increase steadily over time, but the total amount of each payment will remain constant.
• E) 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.

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Definitions:

Defense Mechanism

Psychological strategies employed by individuals to cope with reality and maintain a self-image, often unconsciously.

Rationalization

A defense mechanism in which controversial behaviors or feelings are justified and explained in a seemingly rational or logical manner to avoid the true explanation.

REBT

Rational Emotive Behavior Therapy; a psychotherapeutic approach that helps individuals identify, challenge, and change irrational beliefs that lead to emotional distress.

Irrational Beliefs

Thoughts or convictions not based on reason or logic, often leading to psychological distress; identified as a key target in cognitive behavioral therapies.