Question

Process of loan repayment by installment payments is classified as

• A. appreciation of loan
• B. amortizing a loan
• C. depreciation a loan
• D. appreciation of investment

Answer 1

The correct option is B amortizing a loan

$\Rightarrow$ Process of loan repayment by installment payment is classified as $amortizingaloan.$

$\Rightarrow$ All repayments of interest-bearing debts by a series of payments, usually in size, made at equal intervals of time is called an amortization. Mortgages and many consumer loans are repaid by this method.

$\Rightarrow$ An amortized loan is a loan with scheduled periodic payments that consist of both principal and interest. An amortized loan payment pays the relevant interest expense for the period before any principal is paid and reduced.

$\Rightarrow$ This is opposed to loans with interest-only payment features, balloon payment features and even negatively amortizing payment features.