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

question 76

Multiple Choice

Which of the following statements regarding a 30-year monthly payment amortized mortgage with a nominal interest rate of 10% is correct?

• A)The monthly payments will decline over time.
• B)A smaller proportion of the last monthly payment will be interest, and a larger proportion will be principal, than for the first monthly payment.
• C)The amount representing interest in the first payment would be higher if the nominal interest rate were 7% rather than 10%.
• D)Exactly 10% of the first monthly payment represents interest.

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Definitions:

Equipment

Tangible assets used in operations, such as machinery or office machines, which have a useful life longer than a year.

Straight-Line Method

A depreciation method that allocates an equal amount of the cost of an asset to each year of its useful life.

Fully Depreciated

A term used when a fixed asset has been depreciated to its salvage value and no longer carries a cost on the balance sheet except its possible residual value.

Loss on Disposal

Represents the financial loss a company incurs when it disposes of an asset for less than its carrying value.