Suppose That Over the Life of the Loan,the Total Interest

question 16

Multiple Choice

Suppose that over the life of the loan,the total interest expense for a monthly loan is $7,000,while the total interest payment for an annual loan is $8,000.Which of the below statements is FALSE?

• A)The difference reflects the reduction of the principal each month versus the annual reduction of the principal.
• B)The more frequent the payment,the lower the total interest expense over the life of the loan,even though the effective rate of the loan is higher.
• C)Reducing principal at a faster pace reduces the overall interest paid on a loan.
• D)The more frequent the payment,the lower the total interest expense over the life of the loan,even though the effective rate of the loan is lower.

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