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a $50,000 loan is to be amortized over 7 years, with annual end-of-year payments. which of these statements is correct?

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Proportion of each payment that represents interest as opposed to repayment of principal would be lower if the interest rate were lower.

Amortization is the process of gradually paying-off of debt through scheduled installments that include the component of principal and interest.

  • The amortization tables helps to keep track of amount owed and when payment is due.

  • The table also shows how much to be paid at required intervals (i.e. monthly, bi-monthly, quarterly etc)

  • As the repayment and period of payment increase, the outstanding debt keeps decreasing as well.

  • The rate of interest determines the amount of repayment to be made at each interval

Therefore, if the interest rate were lower, then, the repayment of principal would be lower as well.

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