Which of the Following Characteristics Applies to the Amortization of a Loan

question 51

Multiple Choice

Which of the following characteristics applies to the amortization of a loan such as a home mortgage?

• A) The amortization decreases with each payment.
• B) The amortization increases with each payment.
• C) The amortization is constant throughout the loan.
• D) The amortization fluctuates monthly with changes in interest rates.

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Definitions:

Interest Rates

The price paid for borrowing money, usually expressed as a percentage rate over a period of one year.

Balance Of Trade

The difference between imports from and exports to another country. If imports are larger a trade deficit exists. If exports are larger there is a trade surplus.

Investing Activities

Transactions and events related to the acquisition and disposal of long-term assets and investments, reported in the cash flow statement.

Hedging

A maneuver or contract that eliminates risk from a transaction. In international trade, eliminating exchange rate risk by purchasing a forward contract for delivery of foreign exchange at a specified rate at a specified time.