A $10,000 loan is to be amortized over 5 years, with annual end-of-year payments Given the following facts, which of these statements a correct?
a. The annual payments would be larger if the interest rate were lower.
b. If the loan were amortized over 10 years rather than 5 years, and if the interest rate were the same in either case, the first payment would include more interest under the 5-year amortization plan.
c. The last payment would have a higher proportion of interest than the first payment.
d. The proportion of interest versus principal repayment would be the same for each of the 5 payments.
e. The proportion of each payment that represents interest as opposed to the repayment of principal would be higher if the interest rate were higher.
A $10,000 loan is to be amortized over 5 years, with annual end-of-year payments Given the following facts, which of these statements a correct?
a. The annual payments would be larger if the interest rate were lower.
b. If the loan were amortized over 10 years rather than 5 years, and if the interest rate were the same in either case, the first payment would include more interest under the 5-year amortization plan.
c. The last payment would have a higher proportion of interest than the first payment.
d. The proportion of interest versus principal repayment would be the same for each of the 5 payments.
e. The proportion of each payment that represents interest as opposed to the repayment of principal would be higher if the interest rate were higher.
Related questions
Amortization Schedule
Consider a $50,000 loan to be repaid in equal installments at the end of each of the next 5 years. The interest rate is 6%.
Set up an amortization schedule for the loan. Round your answers to the nearest cent. Enter "0" if required
| Year | Payment | Repayment Interest | Repayment of Principal | Balance |
| 1 | $ | $ | $ | $ |
| 2 | $ | $ | $ | $ |
| 3 | $ | $ | $ | $ |
| 4 | $ | $ | $ | $ |
| 5 | $ | $ | $ | $ |
| Total | $ | $ | $ | |
How large must each annual payment be if the loan is for $100,000? Assume that the interest rate remains at 6% and that the loan is still paid off over 5 years. Round your answer to the nearest cent.
$
How large must each payment be if the loan is for $100,000, the interest rate is 6%, and the loan is paid off in equal installments at the end of each of the next 10 years? This loan is for the same amount as the loan in part b, but the payments are spread out over twice as many periods. Round your answer to the nearest cent.
$
Why are these payments not half as large as the payments on the loan in part b?
I. Because the payments are spread out over a shorter time period, more interest is paid on the loan, which lowers the amount of each payment.
II. Because the payments are spread out over a longer time period, more interest must be paid on the loan, which raises the amount of each payment.
III. Because the payments are spread out over a longer time period, more principal must be paid on the loan, which raises the amount of each payment.
IV. Because the payments are spread out over a longer time period, less interest is paid on the loan, which raises the amount of each payment.
V. Because the payments are spread out over a longer time period, less interest is paid on the loan, which lowers the amount of each payment.
