Question

The payment made each period on an amortized loan is constant, and it consists of some interest and some principal. At the beginning of the loan's life, we have a greater percentage of the monthly payment that will be a repayment of principal. True False

Answer 1

Answer: False

Explanation:

The process of Amortization spreads out a loan into a series of fixed payments over time.

The borrower essentially pays the both the loan's interest and it's principal in varying amounts per month but the total payment is the same.

During the beginning of the loan repayment schedule, interest costs are known to be highest and only a small portion of the balance/principal is paid.

The statement is therefore FALSE.

If you need any clarification or have any questions please feel free to comment or react. Thank you.

Answer 2

Answer:

False

Explanation:

An amortized loan operates in such a way that payments are scheduled periodically it usually applies to both principal and interest. An amortized loan payment starts off first paying what is the relevant interest expense for the period, after then the remainder of the payment reduces the principal. This is what makes the question false.