14. Amortized loans An amortization table reports the amount of Interest and principal contained within each regularly scheduled payment used to repay an amortized loan. Year Beginning Amount Example Amortization Schedule Payment Interest Repayment of Principal Ending Balance 1 2 3 Consider the amount of the interest payments included in each of the payments of an amortized loan. Which of the following statements regarding the pattern of the interest payments is true? Everything else remaining constant, you were to pay more than the minimum payment each year and apply the difference to the repayment of principal, the total amount of interest paid on the loan over its life would increase o The total amount of interest paid over the life of a mortgage loan is equal to the total of all of the loan payments and the loan's principal. The portion of the payment going toward interest is smaller in the early years of the loan and increases as the loan is repaid. The portion of the payment going toward interest is larger in the early years of the loan and decreases as the loan is repaid. True or False. The periodic (for example, monthly, quarterly or annual payment for an amortized loan is determined as the payment term in the formula for the calculation of the present value of an annuity. True False Your dream is about to come true! You are about to buy your est classic sports car. To do so, you have arranged to borrow $80,000 from your local commercial bank. The interest rate on the loan is 7.00%. To simplify the calculations, assume that you will repay your loan over the next six years by ercial bank, you must answer the following questions and increases as the loan is repaid. The portion of the payment going toward interest is larger in the early years of the loan and decreases as the loan is repaid. True or False. The periodic (for example, monthly, quarterly, or annual) payment for an amortized loan is determined as the payment term in the formula for the calculation of the present value of an annuity. True O False Your dream is about to come truel You are about to buy your first classic sports car. To do $20,979.58 rranged to borrow $80,000 from your local commercial bank. The interest rate on the loan is 7.00%. To simplify the calculations, assu ill repay your loan over the next six years by $15,608.80 making annual payments at the end of each year. According to the loan officer at the com ou must answer the following questions before you can go pick up your new car. $16,783.66 $18,462.03 How much is the annual payment on your new car loan? How much of your Year 2 payment will constitute interest on your loan? How much of your Year 3 payment will be used to repay principal on the loan? How much will you pay in total interest to finance the purchase of your $80,000 car? Grade It Now Save & Continue Continue without saving The total amount of inter The portion of the payment going toward interest is smaller in the early years of the loan and increases as the loan is repaid The portion of the payment going toward interest is larger in the early years of the loan and decreases as the loan is repaid. True or False. The periodic (for example, monthly, quarterly, or annual) payment for an amortized loan is determined as the payment term in the formula for the calculation of the present value of an annuity. True False Your dream is about to come truel You are about to buy your first classic sports car. To do so, you have arranged to borrow $80,000 from your local commercial bank. The interest rate on the loan is 7.00%. To simplify the calculations, assu 16,021.43 repay your loan over the next six years by making annual payments at the end of each year. According to the loan officer at the com You must answer the following questions before you can go pick up your new car. $4,817.14 $5298.854 $4,479.94 How much is the annual payment on your new car loan? How much of your Year 2 payment will constitute interest on your loan? How much of your Year 3 payment will be used to repay principal on the loan? How much will you pay in total interest to finance the purchase of your $80,000 car? its life would increase. The total amount of interest paid over the life of a mortgage loan is equal to the total of all of the loan payments and the loan's principal. The portion of the payment going toward interest is smaller in the early years of the loan and increases as the loan is repaid. The portion of the payment going toward interest is larger in the early years of the loan and decreases as the loan is repaid. True or False. The periodic (for example, monthly, quarterly, or annual) payment for an amortized loan is determined as the payment term in the formula for the calculation of the present value of an annuity. O True False Your dream is about to come true! You are about to buy your first classic sports car. To do so, you have arranged to borrow $80,000 from your local commercial bank. The interest rate on the loan is 7.00%. To simplify the calculations, assume that you will repay your loan over the next six years by making annual payments at the end of each year. According to the loan officer at the com $11,907.88 fou must answer the following questions before you can go pick up your new car. $14,084.59 $12,804.17 How much is the annual payment on your new car loan? How much of your Year 2 payment will constitute interest on your loan? How much of your Year 3 payment will be used to repay principal on the loan? $16,005.21 How much will you pay in total interest to finance the purchase of your $80,000 car? Grade It Now Save & Continue Continue without saving and apply the difference to the repayment of principal, the total amount of interest paid on the loan over its life would increase The total amount of interest paid over the life of a mortgage loan is equal to the total of all of the loan payments and the loan's principal. o The portion of the payment going toward interest is smaller in the early years of the loan and increases as the loan is repaid. o The portion of the payment going toward interest is larger in the early years of the loan and decreases as the loan is repaid. True or False. The periodic (for example, monthly, quarterly, or annual) payment for an amortized loan is determined as the payment term in the formula for the calculation of the present value of an annuity O True False Your dream is about to come true! You are about to buy your first classic sports car. To do so, you have arranged to borrow $80,000 from your local commercial bank. The interest rate on the loan is 7.00%. To simplify the calculations, assume that you will repay your loan over the next six years by making annual payments at the end of each year. According to the loan officer at the commercial bank, you must answer the following questions before you can go pick up your new car $22,772.16 $20701.96 $19,252.82 How much is the annual payment on your new car loan? How much of your Year 2 payment will constitute interest on your loan? How much of your Year 3 payment will be used to repay principal on the loan? How much will you pay in total interest to finance the purchase of your $80,000 car? $25,877.45 Grade It Now Save & Continue Continue without saving