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:

Chapter 7 Bankruptcy

A provision of the bankruptcy code that involves the liquidation of a debtor's assets to repay creditors.

Creditor Litigation

Legal proceedings initiated by a creditor to recover debts owed by a debtor, usually when other debt recovery methods have failed.

Security Interest

A legal claim or lien on assets or property, granted to secure the performance of an obligation or repayment of a debt.

Consumer Good

Goods produced and purchased for personal use, as opposed to those made for production or commercial use.