Question

Which of the following statements about amortizing a loan is true? ANSWER Unselected Although the payment is the same each month, the interest that accrues each month decreases. Unselected Each monthly payment becomes smaller because the interest on the balance is decreasing. Unselected The loan balance increases each month as you make more payments. Unselected Each month you pay only the interest and you repay the principal balance at the end of the loan. Unselected I DON'T KNOW YET

Answer 1

The answer is: Although the payment is the same each month, the interest that accrues each month decreases.

Step-by-step explanation:

In an amortized loan, every time you make a payment you pay both interest and principal, so the next month the principal's balance decreases (even if only a small portion).

Then next month when interest is calculated for your payment, it will decrease since the principal's balance has decreased. So even if the monthly payment remains the same, a larger portion of it will go to reducing the principal.