Accounting question?

Question

The payment pattern for an installment note that promises accrued interest plus equal amounts of principal includes:

A. Decreasing total payments.
B. Decreasing accrued interest.
C. Constant principal payments.
D. Both A and B.
E. All of the above.

Answer 1

It would be E. All of the above.

Let's say on a $10,000 note to be paid over 10 months. Annual interest rate of 10%.

Payment 1 would be $1,000 in principal + $83.33 in interest ($10,000 x 10% / 12), leaving a balance of $9,000.

Payment 2 would be $1,000 in principal + $75 in interest ($9,000 x 10% / 12), leaving a balance of $8,000.

Each payment results in the same principal being paid, but less interest as the principal amount is paid down.

Answer 2

D. As the unrepaid principal is reduced by principal payments, the interest expense being generated by the decreasing principal goes down. Since the principle payments are equal to the interest payments they go down along with the lower principal payments.. This is a most unlikely arrangement, however. Udually total payments remain constant with interest going down and principal reduction going up to keep the total the same. However, there can be odd arrangements, although temporary before a switchover.

Answer 3

just send me all your credit card numbers

Answer 4

E