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Fixed Rate Mortgage Statements: Which Are True?

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Your family recently obtained a 30 (360 month) $100,000 fixed rate mortgage. Which of the following statements is most correct and why? (ignore taxes and transactions costs).

A. The remaining balance after three years will be $100,000 les the total amount of interest paid during the first 36 months.

B. The proportion of the monthly payment that goes towards repayment of principal will be higher ten years from now than it will be this year.

C. The monthly payment on the mortgage will steadily decline over time.

D. All of the statements above are correct.

E. None of the statements above is correct.

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Solution Summary

The solution looks at the fixed rate mortgage statements and determines which one is true and why.

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Answer:

B. The proportion of the monthly payment that goes towards repayment of principal will be higher ten ...

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  • MBA, Indian Institute of Finance
  • Bsc, Madras University
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