With fixed principal payments, the interest ___ each period as the principal ___.
A) decreases, decreases
B) increases, increases
C) increases, decreases
D) decreases, increases

Question

With fixed principal payments, the interest ___ each period as the principal ___. 
A) decreases, decreases
B) increases, increases
C) increases, decreases
D) decreases, increases

Quizplus · Accepted Answer

With fixed principal payments, the amount of principal being repaid each period remains constant. As the outstanding principal balance decreases each period, the amount of interest charged on that balance will also decrease. Therefore, the interest will decrease each period as the principal decreases.

With Fixed Principal Payments, the Interest ___ Each Period as the Principal