Which of the Following Statements Regarding a 15-Year (180-Month) $125,000

question 10

Multiple Choice

Which of the following statements regarding a 15-year (180-month) $125,000 fixed-rate mortgage is NOT correct? (Ignore all taxes and transactions costs.)

• A) The remaining balance after 3 years will be $125,000 less the total amount of interest paid during the first 36 months.
• B) Because it is a fixed-rate mortgage, the monthly loan payments (which include both interest and principal payments) are constant.
• C) The proportion of the monthly payment that goes toward repayment of principal will be higher 10 years from now than it will be the first year.
• D) The outstanding balance gets paid off at a faster rate in the later years of a loan's life.

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Definitions:

Compounded Semi-Annually

The process of calculating interest where the interest is added to the principal sum of a loan or deposit twice a year.

Mutual Fund

A type of investment vehicle consisting of a portfolio of stocks, bonds, or other securities, which is managed by an investment company with the capital pooled from many investors.

Rate of Total Return

A measure of the gain or loss on an investment over a specified period, including interest, capital gains, dividends, and distributions realized over the period.

Rental Income

Income received from leasing out property or other real estate assets.