BUSINESS ADMINISTRATION
FINANCIAL MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Suppose that over the life of the loan, the total interest expense for a monthly loan is $7, 000, while the total interest payment for an annual loan is $8, 000. Which of the below statements is FALSE?
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The difference reflects the reduction of the principal each month versus the annual reduction of the principal.
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The more frequent the payment, the lower the total interest expense over the life of the loan, even though the effective rate of the loan is lower.
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Reducing principal at a faster pace reduces the overall interest paid on a loan.
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The more frequent the payment, the lower the total interest expense over the life of the loan, even though the effective rate of the loan is higher.
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Explanation:
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