Which of the Following Statements Regarding a 20-Year Monthly Payment

question 69

Multiple Choice

Which of the following statements regarding a 20-year monthly payment amortized mortgage with a nominal interest rate of 10% is CORRECT?

• A) exactly 10% of the first monthly payment represents interest.
• B) the monthly payments will increase over time.
• C) a larger proportion of the first monthly payment will be interest, and a smaller proportion will be principal, than for the last monthly payment.
• D) the total dollar amount of interest being paid off each month gets larger as the loan approaches maturity.
• E) the amount representing interest in the first payment would be higher if the nominal interest rate were 7% rather than 10%.

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Definitions:

Recency Effect

An effect that occurs when recently encountered information primarily influences attitudes (e.g., a commercial viewed just before shopping influences a shopper’s choices).

Primacy Effect

The idea that what we learn early colors how we judge subsequent information.

Delay

The act of postponing or slowing something down, causing it to occur later than previously planned or expected.

Messages

Units of communication intended to convey information, feelings, or instructions from one entity to another.