Question

The following table shows the first two years of a three-year amortization schedule.
A 3-year amortization schedule. The payments are the same, the principal increases, the interest decreases, and the balance decreases over the 3 years.
Use the information in the table to decide which of the following statements is true.
a.
The interest amount increases each month.
b.
The principal amount decreases each month.
c.
The payment amount changes each month.
d.
The payment amount each month stays the same.

Answer 1

Answer: d.

Explanation: the table (and the statement) says the payments are the same each period, while the interest portion falls and the principal portion rises as the balance decreases. Thus (a) and (b) are false and (c) is false; (d) is true.