When an entrepreneur makes a scheduled payment on a conventional loan ________.
A) Part of it goes to principal and part goes to interest
B) All of it goes to principal (balance sheet)
C) All of it goes to interest (income statement)
D) Part of it pays penalties
E) None of the above

Question

Quizplus · Accepted Answer

When a scheduled payment is made on a conventional loan, part of it goes to pay down the principal balance of the loan, while the other part goes towards paying the interest that has accrued on the remaining balance. This split between principal and interest payments varies over time, with more of the payment going towards principal as the loan balance is reduced.

When an Entrepreneur Makes a Scheduled Payment on a Conventional