which is true for amortization? * 1 point the more of a loan you pay off ahead of time the less interest you…

which is true for amortization? * 1 point the more of a loan you pay off ahead of time the less interest you will end up paying the more of a loan you pay off ahead of time them more interest you will end up paying savings account * 1 point beginning balance $1,000 apr 5% annual inflation rate 8% account balance $1,050 what is the real rate of return? -1% 1% -3% 3%

which is true for amortization? * 1 point the more of a loan you pay off ahead of time the less interest you will end up paying the more of a loan you pay off ahead of time them more interest you will end up paying savings account * 1 point beginning balance $1,000 apr 5% annual inflation rate 8% account balance $1,050 what is the real rate of return? -1% 1% -3% 3%

Answer

Explanation:

Step1: Recall amortization concept

Amortization of a loan spreads payments over time. Interest is calculated on the remaining principal. Paying off more of the loan early reduces the principal faster, thus less interest accumulates.

Step2: Recall real - rate - of - return formula

The Fisher equation for approximate real rate of return $r$ is $r = i - \pi$, where $i$ is the nominal interest rate (APR) and $\pi$ is the inflation rate. Here, $i = 5%$ and $\pi=8%$. $r=5% - 8%=- 3%$

Answer:

  1. The more of a loan you pay off ahead of time the less interest you will end up paying
  2. -3%