Possible Negative Amortization Resulting from a Rise in the Interest

question 82

Multiple Choice

Possible negative amortization resulting from a rise in the interest rate on a adjustable rate mortgage may be avoided by

• A)raising the rate cap.
• B)lowering the payment cap.
• C)shortening the term of the mortgage.
• D)increasing the monthly payment.

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Definitions:

Closing Entry

A journal entry made at the end of an accounting period to transfer temporary accounts to permanent accounts and prepare the books for the next period.

Real Account

Another term for permanent account in accounting, referring to accounts that are not closed at the end of the accounting period and carry their ending balance into the next period.

Nominal Account

A nominal account is a temporary financial account that shows the incomes, gains, expenses, or losses over an accounting period, and is reset to zero at the beginning of each new period.

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period, culminating in net income or loss.