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10 June, 14:13

Midway through the life of an amortized loan, the percentage of the payment that represents interest must be equal to the percentage that represents repayment of principal. This is true regardless of the original life of the loan or the interest rate on the loan. True False

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  1. 10 June, 17:36
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    False

    Explanation:

    The percentage of repayment of loan might be different from the percentage in interest and it is not depending on the original life and interest rate of the loan. E. g. A loan of $500,000 @ 10% amortized over 5 years time.

    Year Balance Payment Interest @ 10% Principal payment

    1 500,000 150,000 50,000 100,000

    2 400,000 150,000 40,000 110,000

    3 290,000 150,000 29,000 121,000

    4 169,000 150,000 16,900 133,100

    5 35900 39490 3590 3590

    In each year the percentage of principal paid is not eaquat to percentage of principal paid.
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