Which of the following statements is (are)true with respect to simple interest loans repaid by a series of partial payments?
(I)Using the Declining Balance Method,a partial payment is not deducted from the outstanding balance at the time the partial payment is made if the partial payment is greater than the interest due at the time.
(II)The total interest paid over the term of the loan will be the same under the Merchant's Rule and the Declining Balance Method.
A)Both are true
B)(I)only
C)(II)only
D)None are true

Question

Quizplus · Accepted Answer

(I) is false because under the Declining Balance Method, a partial payment is always deducted from the outstanding balance at the time the partial payment is made, regardless of whether it is greater than the interest due. (II) is false because the total interest paid can differ between the Merchant's Rule and the Declining Balance Method due to differences in how payments are applied to principal and interest.

Which of the Following Statements Is (Are)true with Respect to Simple