When an Installment Note Is Structured as a "Fully Amortizing

question 59

Multiple Choice

When an installment note is structured as a "fully amortizing" loan with equal monthly payments (such as a traditional mortgage) :

• A)The portion of each payment allocated to interest expense is the same each month.
• B)The sum of the monthly payments is equal to the amount of the installment note (mortgage).
• C)The difference between the sum of all monthly payments and the principal amount of the note constitutes interest.
• D)The portion of each payment allocated to repayment of principal decreases each month as the mortgage is paid off.

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Definitions:

Warranty Terms

Conditions and promises made by a seller or manufacturer concerning the quality, functionality, or lifespan of a product.

Truth In Lending Act

A law at the federal level aimed at fostering the knowledgeable use of consumer credit through mandates on disclosing its conditions and expenses.

Variable Interest Rate

An interest rate that can change over the duration of a loan based on the market conditions or an index.

Index Rate

A benchmark interest rate used by financial institutions to determine the rate charged on loans or the return on investment.