Which of the Following Statements Regarding a 30-Year Monthly Payment

question 116

Multiple Choice

Which of the following statements regarding a 30-year monthly payment amortized mortgage with a nominal interest rate of 8% is CORRECT?

• A) Exactly 8% of the first monthly payment represents interest.
• B) The monthly payments will decline over time.
• C) A smaller proportion of the last monthly payment will be interest, and a larger proportion will be principal, than for the first monthly payment.
• D) The total dollar amount of principal being paid off each month gets smaller as the loan approaches maturity.
• E) The amount representing interest in the first payment would be higher if the nominal interest rate were 6% rather than 8%.

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Definitions:

Fixed Costs

Costs that do not vary with the level of output or production, such as rent, salaries, and loan payments.

Variable Costs

Costs that vary directly with the level of production or output.

Yearly Return

The percentage of increase or decrease in the value of an investment over a one-year period.

Maximize

To increase to the greatest possible amount or degree.