The correct response is: The principal decreases with every payment, so there is less interest to pay.
As the principal balance decreases with each payment, the amount of interest that accrues also decreases, resulting in a lower interest payment each month. This is because the interest is calculated based on the remaining balance of the loan.
Why does the amount of interest go down every month according to this amortization table?%0D%0A%0D%0AMonth%0D%0A%0D%0APayment%0D%0A%0D%0APrincipal%0D%0A%0D%0AInterest (9%)%0D%0A%0D%0APrincipal Balance%0D%0A%0D%0A1%0D%0A%0D%0A$874.50%0D%0A%0D%0A$799.50%0D%0A%0D%0A$75.00%0D%0A%0D%0A$9,200.50%0D%0A%0D%0A2%0D%0A%0D%0A$874.50%0D%0A%0D%0A$805.50%0D%0A%0D%0A$69.00%0D%0A%0D%0A$8,395.00%0D%0A%0D%0A3%0D%0A%0D%0A$874.50%0D%0A%0D%0A$815.50%0D%0A%0D%0A$63.00%0D%0A%0D%0A$7,583.50%0D%0A%0D%0A(1 point)%0D%0AResponses%0D%0A%0D%0AIf the principal payment goes up, so does the interest.%0D%0A%0D%0AIf the principal payment goes up, so does the interest.%0D%0A%0D%0ALenders are required to reduce the interest rate as the loan is paid off.%0D%0A%0D%0ALenders are required to reduce the interest rate as the loan is paid off.%0D%0A%0D%0AThe payments increase as the loan is paid off, so there is less interest.%0D%0A%0D%0AThe payments increase as the loan is paid off, so there is less interest.%0D%0A%0D%0AThe principal decreases with every payment, so there is less interest to pay.
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