FinanceIntermediateDelaware Exam
What does 'amortization' mean in the context of a mortgage loan?
AThe process of increasing the principal balance over time
BThe gradual payoff of a loan through scheduled principal and interest paymentsCorrect
CThe calculation of prepayment penalties
DThe adjustment of the interest rate over the loan term
Why The gradual payoff of a loan through scheduled principal and interest payments Is Correct
Answer B: The gradual payoff of a loan through scheduled principal and interest payments
Amortization is the process of paying off a loan through regular scheduled payments that include both principal and interest, gradually reducing the outstanding loan balance to zero.
Exam Tip: Finance
Finance questions often involve calculations. Master the T-bar method, understand the difference between conventional and government-backed loans, and know key ratios like LTV and DTI.
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