Answer:
The second year's interest expense would have been less.
Explanation:
Given that
Interest rate = 6%
Borrowing cash for 5 year note = $500,000
So, the interest expense
= Borrowing cash for 5-year note × Interest rate
= $500,000 × 6%
= $30,000
Now for an installment note, we have to consider both interest and the principal payment
So, the first option is false, as the annual cash payment is more instead of loss
The second option is also false as it the first year interest payment would remain the same instead of being higher
The third option is correct as the principal amount plus the interest expense would get reduced by their actual amount because of the first payment with regard to principal and interest
And, the fourth option is wrong as the effective interest rate would be less instead of being higher