A $150, 000 Loan Is to Be Amortized Over 6

question 14

Multiple Choice

A $150, 000 loan is to be amortized over 6 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 7 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 6 years, and if the interest rate were the same in either case, the first payment would include more dollars of interest under the 6-year amortization plan.
• D) The proportion of each payment that represents interest as opposed to repayment of principal would be higher if the interest rate were lower.
• E) The proportion of each payment that represents interest versus repayment of principal would be higher if the interest rate were higher.

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