Two Loans Have the Same Interest Rate and Maturity

question 18

Multiple Choice

Two loans have the same interest rate and maturity. Loan A has a 15-year amortization rate. Loan B has a 30-year amortization rate. In comparing these two loans from a borrower's perspective:

• A) The advantage of Loan A is lower monthly payments and lower balloon payment at maturity.
• B) The advantage of Loan B is lower monthly payments and lower balloon payment at maturity.
• C) The advantage of Loan A is lower monthly payments but its disadvantage is a higher balloon at maturity.
• D) The advantage of Loan B is lower monthly payments but its disadvantage is a higher balloon at maturity.

---

Definitions:

Economic Loss

The difference between the cost of inputs and the revenues received from outputs, indicating a negative outcome in financial performance.

Profit-Maximizing Price

The selling price that leads to the highest possible profits for a firm, considering its costs and market demand.

Panel

A group of people gathered to discuss, investigate, or make decisions about a specific subject or issue.

Restaurants

Establishments where food and drinks are prepared and served to customers.