On January 1,2011,Ajax Corporation signed a $1,000,000,7%,10-year mortgage note to buy a new warehouse.The note will be repaid in 10 equal annual installments of $142,378.Over the 10-year period,as each installment payment is made,the portion of the payment that is used to reduce the principal will ________.
A)increase
B)decrease
C)stay the same
D)The answer cannot be determined from the information given.

Question

Quizplus · Accepted Answer

The portion of each installment payment used to reduce the principal increases over time in a standard amortizing loan, as earlier payments are more heavily weighted towards interest and later payments more towards principal reduction.

On January 1,2011,Ajax Corporation Signed a $1,000,000,7%,10-Year Mortgage Note to Buy