A $250,000 Loan Is to Be Amortized Over 8 Years

question 154

Multiple Choice

A $250,000 loan is to be amortized over 8 years, with annual end-of-year payments. Which of these statements is CORRECT?

• A) the proportion of interest versus principal repayment would be the same for each of the 8 payments.
• B) the annual payments would be larger if the interest rate were lower.
• C) if the loan were amortized over 10 years rather than 8 years, and if the interest rate were the same in either case, the first payment would include more dollars of interest under the 8-year amortization plan.
• D) the proportion of each payment that represents interest as opposed to repayment of principal would be lower if the interest rate were lower.
• E) the last payment would have a higher proportion of interest than the first payment.