Which of the following is true of fixed payment loans?
A) The borrower repays both the principal and interest at the maturity date.
B) Installment loans and mortgages are frequently of the fixed payment type.
C) The borrower pays interest periodically and the principal at the maturity date.
D) Commercial loans to businesses are often of this type.

Question

Quizplus · Accepted Answer

Fixed payment loans require the borrower to make regular payments consisting of both principal and interest, until the loan is fully repaid. Installment loans, such as auto loans, and mortgages are common examples of fixed payment loans. Option A is incorrect, as fixed payment loans require the borrower to pay both principal and interest with each installment, not just at maturity. Option C is incorrect, as this describes an interest-only loan. Option D may or may not be true but is not relevant to the nature of fixed payment loans.

Which of the Following Is True of Fixed Payment Loans