An equal-payment mortgage is calculated using the interest on the remaining balance of the capital every month, whereas interest paid on a line of credit is deducted from your account every month.So, mortgage payments are calculated using ______ where line of credit interest is calculated using ______.
A)simple interest, compound interest
B)compound interest, simple interest
C)simple interest, simple interest
D)compound interest, compound interest

Question

Quizplus · Accepted Answer

An equal-payment mortgage uses compound interest, as the interest is added to the remaining balance every month. On the other hand, a line of credit uses simple interest, as the interest is calculated based on the outstanding balance each month and deducted from the account. Therefore, the correct choice is B, which states that mortgage payments are calculated using compound interest while line of credit interest is calculated using simple interest.

An Equal-Payment Mortgage Is Calculated Using the Interest on the Remaining