Question

Which of the following statements is true of amortization? a. Amortization schedule represents only the interest portion of the loan. b. With an amortized loan, a larger proportion of each month's payment goes toward interest in the early periods. c. The computation of loan amortization is wholly based on the computation of simple interest. d. With an amortized loan, a periodic payment of principal portion gradually decreases over a period.

Answer 1

Answer:

B). With an amortized loan, a larger proportion of each month's payment goes toward interest in the early periods.

Explanation:

Amortization is referred to as a process or accounting technique that divides the amount of loan into a series or chain of fixed monthly payments. It reduces the book value of loan periodically/gradually as the debt is being paid off in installments. As per the question, the statement that asserts a true claim is option B which states that with an amortized loan, a great portion of each month's payment goes towards interest due to the addition of high-interest rates over the principal. Thus, option B displays a true assertion.