Final answer:
b. An amortized loan requires regular payments of interest and the return of the principal at the end. The borrower makes regular payments that include both interest and a portion of the principal. Over time, the amount of interest paid decreases and the amount of principal repaid increases, resulting in full repayment of the loan at the end of the term.
Step-by-step explanation:
b. An amortized loan requires regular payments of interest and the return of the principal at the end. This means that the borrower will make regular payments that include both interest and a portion of the principal. Over time, the amount of interest paid decreases and the amount of principal repaid increases, resulting in the full repayment of the loan at the end of the term.
For example, let's say you borrow $10,000 with a 5% interest rate and a term of 5 years. With an amortized loan, you will make regular monthly payments that include both interest and principal. In the beginning, the interest portion of the payment will be higher, but as you make payments, the principal portion will increase.
Amortized loans are commonly used for mortgages, car loans, and student loans.