Question

Which of the following statements is true of amortization? Amortization solely refers to the total value to be paid by the borrower at the end of maturity. The computation of loan amortization is wholly based on the computation of simple interest. The amortization schedule provides principal, interest, and unpaid principal balance for each month. The amortization schedule represents only the interest portion of the loan.

Answer 1

Answer:

The amortization schedule provides the data of equated monthly payments for which the classification of principal and interest along with unpaid principal balance is provided.

Explanation:

The true statement of amortization is that amortization schedule provides the data of equated monthly payments for which the classification of principal and interest along with unpaid principal balance is provided.

Answer 2

Answer:

The amortization schedule provides principal, interest, and unpaid principal balance for each month.

Explanation:

When you are paying a loan, the amortization schedule (or table) should include the following information:

• principal balance at the beginning of the period
• total payment
• interest paid (interest is always paid first)
• amount of principal paid
• principal balance at the end of the period after the payment (this will be the next period's beginning balance)

The Homeowners Protection Act (HOPA) requires that banks provide an amortization schedule for mortgage loans, but on most loans banks are only required to provide a payment schedule. An amortization schedule is useful because the more information you have about how much you owe and what you are paying, the better.