Question 8) When a loan is amortized, a relatively high percentage of the payment goes to reduce the outstanding principal in the early years, and the principal repayment’s percentage declines in the loan’s later years.,,True or False,,Question 9) A $10,000 loan is to be amortized over 5 years, with annual end of year payments. Given these facts, which of these statements is correct?,,A) The annual payments would be larger if the interest rate were lower.,,B) If the loan were amortized over 10 years rather than 5 years, and if the interest rate were the same in either case, the first payment would include more dollars of interest under the 5 year amortization plan.,,C) The last payment would have a higher proportion of interest than the first payment.,,D) The proportion of interest versus principal repayment would be the same for each of the payments.,,E) The proportion of each payment that represents interest as opposed to repayment of principal would be higher if the interest rate were higher.,,Question 10) You are analyzing the value of an investment by calculating the present value of its expected cash flows. Which of the following would cause the investment too look better?,,A) The discount rate decreases.,,B) The cash flows are extended over a longer period of time, but the total amount of the cash flows remains the same.,,C) The discount rate increases.,,D) The total amount of cash flows remains the same, but more of the cash flows are received in the later years and less are received in the earlier years.
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