Final answer:
A balloon payment is due at the end of a balloon loan because the loan term is shorter and the loan has only been partially amortized. Option C
Step-by-step explanation:
A balloon payment is due at the end of a balloon loan because the loan term is shorter and the loan has only been partially amortized.
In a balloon loan, the borrower makes smaller monthly payments throughout the loan term and the remaining balance becomes due in a lump sum at the end of the term. This is because the loan term is shorter than the amortization period, meaning that the loan has not been fully paid off by the end of the term.
For example, suppose a borrower takes out a 5-year balloon loan with monthly payments. Only a portion of the loan is paid off during the 5 years, and the remaining balance (the balloon payment) is due at the end. option C