Which of the statements below is FALSE?
A)Reducing principal at a faster pace reduces the overall interest paid on a loan.
B)The more frequent the payment,the lower the total interest expense over the life of the loan,even though the effective rate of the loan is higher.
C)Reducing principal at a faster pace increases the overall interest paid on a loan.
D)Monthly interest on a loan is equal to the beginning balance times the periodic interest rate.

Question

Quizplus · Accepted Answer

Reducing principal at a faster pace cannot increase the overall interest paid on a loan as it would lead to paying off the loan faster and hence, paying less interest over the life of the loan. Therefore, option C is false. The other options are true - reducing principal at a faster pace reduces overall interest paid (option A), more frequent payments lower total interest expense (option B), and monthly interest on a loan is equal to the beginning balance times periodic interest rate (option D).

Which of the Statements Below Is FALSE