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:

Nominal Accounts

Accounts that are closed at the end of each accounting period, including revenue, expense, and withdrawal accounts.

Temporary Accounts

Accounts used to track transactions in a single accounting period, which are closed and transferred to permanent accounts at the end of the period.

Income Summary

An account used in the closing process that summarizes the revenue and expenses of an accounting period to determine the net income or loss.

Capital Account

An account showing the net worth of a business at a specific point, calculated as assets minus liabilities and preferred stock.