Which of the Following Statements Regarding a 20-Year (240-Month) $225,000

question 28

Multiple Choice

Which of the following statements regarding a 20-year (240-month) $225,000, fixed-rate mortgage is CORRECT? (Ignore taxes and transactions costs.)

• A) The outstanding balance declines at a slower rate in the later years of the loan's life.
• B) The remaining balance after three years will be $225,000 less one third of the interest paid during the first three years.
• C) Because it is a fixed-rate mortgage, the monthly loan payments (which include both interest and principal payments) are constant.
• D) Interest payments on the mortgage will increase steadily over time, but the total amount of each payment will remain constant.
• E) 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.

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Definitions:

Proportions

The ratio of part to whole, expressed as a fraction or percentage, describing the relative size of parts within a population or a whole.

Nominal Variables

Categorical variables that represent different categories or types which do not have a natural order or ranking among them.

Relationship

The method of connection between two or more concepts, objects, or individuals, or the existence of such a connection.

Degrees Of Freedom

The count of distinct values or measures that can be attributed to a statistical distribution while adhering to all restrictions.