Finance
An Alaska buyer takes out an 'interest-only' loan for 5 years before converting to a fully amortizing loan. During the interest-only period:
AThe principal balance decreases normally
BThe principal balance remains unchanged while the borrower only pays interest✓ Correct
CThe loan must be refinanced at the end of 5 years
DInterest accrues but does not need to be paid
Explanation
During the interest-only period, the borrower pays only the interest due each month — no principal is repaid and the loan balance does not decrease. When the interest-only period ends, payments increase to include principal amortization.
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