Which of the following statements is correct?
A) Other things held constant,an increase in the number of discounting periods per year increases the present value of a given annual annuity.
B) Other things held constant,an increase in the number of discounting periods per year increases the present value of a lump sum to be received in the future.
C) The payment made each period under an amortized loan is constant,and it consists of some interest and some principal.The later we are is the loan's life,the smaller the interest portion of the payment.
D) There is an inverse relationship between the present value interest factor of an annuity and the future value interest factor of an annuity, (i.e. ,one is the reciprocal of the other).
E) Each of the above statements is true.

Question

Quizplus · Accepted Answer

Statement C is correct because in an amortized loan, the total payment amount per period remains constant, but the composition of the payment changes over time. Early in the loan's life, a larger portion of the payment is applied toward interest. As the loan matures, the interest portion decreases while the principal portion increases.

Which of the Following Statements Is Correct