Which of the following statements regarding a 15-year (180-month)$125,000,fixed-rate mortgage is CORRECT? (Ignore taxes and transactions costs. )
A) The remaining balance after three years will be $125,000 less one third of the interest paid during the first three years.
B) Because the outstanding balance declines over time,the monthly payments will also decline over time.
C) Interest payments on the mortgage will increase steadily over time,but the total amount of each payment will remain constant.
D) The proportion of the monthly payment that goes towards repayment of principal will be lower 10 years from now than it will be the first year.
E) The outstanding balance declines at a faster rate in the later years of the loan's life.

Question

Quizplus · Accepted Answer

e is the correct answer.Thinking through the question,the other answers can all be eliminated.One could also set up an amortization schedule to prove that only statement e is correct.

Which of the Following Statements Regarding a 15-Year (180-Month)$125,000,fixed-Rate Mortgage