Which of the following correctly describes an installment note?
A)An installment note requires equal interest payments with the entire principal balance paid at maturity.
B)An installment note requires equal payments of interest and principal in which the amount of interest decreases over the life of the note.
C)An installment note requires equal payments of interest and principal in which the amount of interest increases over the life of the note.
D)The installment note requires decreasing payments of interest and principal in which the amount of interest remains constant over the life of the note.

Question

Quizplus · Accepted Answer

Loans that require payments of principal and interest at regular intervals (amortizing loans)are typically represented by installment notes.As the principal balance of the note decreases over time the portion of the payment that is applied to interest expense decreases.However,the amount of the payment remains constant.

Which of the Following Correctly Describes an Installment Note