A $150,000 Loan Is to Be Amortized Over 6 Years

question 66

Multiple Choice

A $150,000 loan is to be amortized over 6 years, with annual end-of-year payments.Which of these statements is CORRECT?

• A) The proportion of interest versus principal repayment would be the same for each of the 7 payments.
• B) The annual payments would be larger if the interest rate were lower.
• C) If the loan were amortized over 10 years rather than 6 years, and if the interest rate were the same in either case, the first payment would include more dollars of interest under the 6-year amortization plan.
• D) The proportion of each payment that represents interest as opposed to repayment of principal would be higher if the interest rate were lower.
• E) The proportion of each payment that represents interest versus repayment of principal would be higher if the interest rate were higher.

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Definitions:

Factor Analysis

A statistical method for analyzing the intercorrelations among various measures or test scores; clusters of measures or scores that are highly correlated are assumed to measure the same underlying trait or ability (factor).

Congruence

The degree to which things align or match up, often used in psychology to describe the alignment between an individual's self-concept and their experiences.

Libido

In psychoanalysis, the psychic energy that fuels the life or sexual instincts of the id.

Ego

In psychoanalysis, the part of personality that represents reason, good sense, and rational self-control.