BUISENESS MANAGEMENT
FINANCIAL MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Which of the following is NOT true with regard to an amortization table?
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The interest payment for a period is equal to the periodic interest rate multiplied by the beginning-of-the-period principal balance.
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The remaining principal balance at the end of a payment period is equal to the beginning-of-the-period principal less the total payment.
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The total payment is calculated by using the present value of an annuity formula.
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All of the above are true.
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Explanation:
Detailed explanation-1: -Principal is the money that you originally agreed to pay back. Interest is the cost of borrowing the principal. Generally, any payment made on an auto loan will be applied first to any fees that are due (for example, late fees).
Detailed explanation-2: -Interest portion is declining because in each installment there is some principal repaid which decreases the principal balance in each subsequent period.
There is 1 question to complete.