Question

All the below are true or false:

a) The principal part of a fixed mortgage loan payment can be found by multiplying the periodic interest rate by the ending balance for a given period.

b) For​ fixed-rate fully amortized mortgage​ loans, more of the fixed payment goes towards principal as we approach the end of the loan term.

c) We can find the amount needed to pay off a​ fixed-rate fully amortized mortgage loan at any point in time by solving for the PV of the remaining payments.

d)  “PMT" in the PVA formula tells us the periodic mortgage payments for a​ fixed-rate fully amortized loan.

Answer 1

a) The principal part of a fixed mortgage loan payment can be found by multiplying the periodic interest rate by the ending balance for a given period.

False

Explanation:

This will give the interest part on the remaining mortgage payment.

b) For​ fixed-rate fully amortized mortgage​ loans, more of the fixed payment goes towards principal as we approach the end of the loan term.

True

Explanation:

As one moves toward the end to mortgage loans, principal gets reduced by periodic payments and interest is charged upon declining balance so the interest amount gets reduced and as periodic payment is fixed so principal payment increases.

c) We can find the amount needed to pay off a​ fixed-rate fully amortized mortgage loan at any point in time by solving for the PV of the remaining payments.

True

Explanation:

Present Value of remaining payment will take into consideration the interest rate and the remaining amount of principal payment.

d)  “PMT" in the PVA formula tells us the periodic mortgage payments for a​ fixed-rate fully amortized loan.

True

Explanation:

PMT means payment, it is calculated by determining the interest rate, the present value of mortgage and time period.