savings account\nbeginning balance $1,000\napr 5%\nannual inflation rate 8%\naccount balance $1,050\ndid the…

savings account\nbeginning balance $1,000\napr 5%\nannual inflation rate 8%\naccount balance $1,050\ndid the purchasing power rise or fall?\nrise\nfall\nwhich is true for amortization?\npays more of the interest at the beginning of the loan\npays more of the interest at the end of the loan

savings account\nbeginning balance $1,000\napr 5%\nannual inflation rate 8%\naccount balance $1,050\ndid the purchasing power rise or fall?\nrise\nfall\nwhich is true for amortization?\npays more of the interest at the beginning of the loan\npays more of the interest at the end of the loan

Answer

Explanation:

Step1: Analyze purchasing - power change

The account balance increased by 5% (from $1000 to $1050) due to the APR. But the inflation rate is 8%. Since the inflation rate is higher than the interest - rate growth of the account, the purchasing power has decreased.

Step2: Analyze amortization

In an amortized loan, in the beginning, a larger portion of the payment goes towards paying the interest, and as time goes on, more goes towards paying the principal.

Answer:

  1. B. fall
  2. A. Pays more of the interest at the beginning of the loan