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butalik [34]
3 years ago
11

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

CORRECT?
a. The total dollar amount of interest being paid off each month gets larger as the loan approaches maturity.
b. The monthly payments will increase over time.
c. Exactly 10% of the first monthly payment represents interest.
d. A larger proportion of the first monthly payment will be interest, and a smaller proportion will be principal, than for the last monthly payment.
e. The amount representing interest in the first payment would be higher if the nominal interest rate were 7% rather than 10%.
Business
1 answer:
KIM [24]3 years ago
3 0

Answer:

Option D is correct

Explanation:

Option A is incorrect because in amortized mortgage case the person is paying interest plus principal amount and this aggregated amount gets lower with passage of months because the principal amount left to pay gets lowered and so the interest on this principal amount gets lowered. So saying that the interest paid each month by the passage of months get increased is incorrect.

Option B is also incorrect because monthly payment decreases with passage of time as stated in the justification of Option A above.

Option C is also incorrect because it depends upon the time period because time period is directly proportional to Mortgage paid. The greater the time period is the grerater would be the mortgage paid and the greater the mortgage payment is the greater is the share of interest payment share percentage.

Option D is also incorrect because in amortized mortgage case the person is paying interest plus principal amount and this aggregated amount gets lower with passage of months because the principal amount left to pay gets lowered and so the interest on this principal amount gets lowered. So saying that the interest paid in the first monthly payment will be higher is correct and also that the interest cost on the last payment of mortgage will be lower.

Option E is also incorrect because the amount representing interest in the first payment would be higher only if the nominal interest rate increases from the 10% and the option E says the opposite.

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Step-by-step explanation:

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