Question

When a loan is amortized, it means:

A. the borrower is in default.
B. the principal and interest are paid off by the borrower over the life of the loan

C. the interest is due entirely at the maturity date.
D. the principal in never repaid, only interest.

Answer 1

Ans- Option B. the principal and interest are paid off by the borrower over the life of the loan

When Loan is amortized, the borrower is require to pay fixed periodic payments over the period of the loan. The fixed periodic payment consists of Interest portion along with Principal Portion. Interest and Principal are paid over the period of the loan. Hence, all other option other than Option B are Incorrect.

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