Question

Answer Question 22 (3 points) For an amortized loan with fixed payments (like a mortgage), the amount of principal reduction increases with each payment. True False Question 23 (3 points) There is an inverse relationship between risk and present value. True False Question 24 (3 points) Saved Which of the following investments would have the lowest present value? Assume that the effective annual rate for all investments is the same and is greater than zero 1) Investment A pays $250 at the end of every year for the next 10 years fa totat of 10 payments 2) Investment B pays $125 at the end of every 6 month period for the next 10 years total of 20 payments di

Answer 1

Question 22:

TRUE

For an amortized loans with fixed payments(like a mortgage), the amount of principal reduction increases with each payment.

This is because, the interest component is more in the beginning, which reduces with each passing year and thus the principal component in the total fixed payment made increases.