In each succeeding payment on an installment note:
A)The amount of interest paid increases.
B)The amount of principal reduction increases.
C)The amount of interest paid is unchanged.
D)The amounts paid for both interest and principal increase proportionately.

Question

Quizplus · Accepted Answer

Each payment on an installment note includes both interest and principal, but the amount of interest decreases as the outstanding balance decreases. Therefore, in each succeeding payment, a larger portion of the payment will go towards reducing the principal balance, resulting in a larger principal reduction.

In Each Succeeding Payment on an Installment Note