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Author Question: Which of the following statements is FALSE if you increase your monthly payment above the required ... (Read 46 times)

jeatrice

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on: Jul 10, 2018
Which of the following statements is FALSE if you increase your monthly payment above the required loan payment?
 
  A) The extra portion of the payment goes to the principal.
  B) You can significantly decrease the number of payments needed to pay off the loan.
  C) The extra portion of the payment increases the principal.
  D) Besides lowering the principal, you can significantly reduce the number of payments needed to pay off the loan.

Question 2

Which of the following has the highest interest rate risk?
 
  A) Bendix Corporation six-month commercial paper
  B) a Southwest Airlines bond maturing in four years
  C) a six-month money-market certificate at a federally issued bank
  D) a 20-year U.S. Treasury bond


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Kingjoffery

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Reply #1 on: Jul 10, 2018
Answer to Question 1

Answer: C
Explanation: C) If you increase your monthly payment above the required loan payment, then the additional portion of the payment goes to DECREASING the principal. But the important fact to note is that an extra payment above the required annuity can significantly reduce the number of payments needed to pay off the loan.

Answer to Question 2

D


jeatrice

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Reply 2 on: Jul 10, 2018
Great answer, keep it coming :)

Dinolord

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Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

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