On January 1,2011,Ace Electronics borrowed $40,000 on a five-year,7% note.The loan will be repaid in 5 equal installments of $9,756 each year,beginning on December 31,2011.With each successive payment on the note,________ of the payment will be applied to the loan principal.
A)more
B)the same amount
C)less
D)The answer cannot be determined from the information given.

Question

Quizplus · Accepted Answer

With each successive payment on a loan with fixed installments, more of the payment is applied to the principal because the interest portion decreases as the principal balance decreases.

On January 1,2011,Ace Electronics Borrowed $40,000 on a Five-Year,7% Note