What characterizes an amortized note?

What characterizes an amortized note?

• A. Variable interest rates
• B. Balloon payments after five years
• C. Monthly payments of principle and interest that pay off the loan with the last payment
• D. One lump sum payment at the end of the loan term

Answer: (C)

An amortized note is a loan that is paid off in equal installments of principal and interest over a set period of time. Option A (variable interest rates) would result in fluctuating payments, making the loan not amortized. Option B (balloon payments after five years) would mean that the loan is not being paid off at a consistent rate, also making it not amortized. Option D (one lump sum payment at the end of the loan term) would result in the borrower owing a large amount of money at the end of the loan term, again making it not an amortized loan. Therefore, option C is the correct answer as it accurately describes the characteristics of an amortized note.

An amortized note is a loan that is paid off in equal installments of principal and interest over a set period of time. Option A (variable interest rates) would result in fluctuating payments, making the loan not amortized. Option B (balloon payments after five years) would mean that the loan is not being paid off at a consistent rate, also making it not amortized. Option D (one lump sum payment at the end of the loan term) would result in the borrower owing a large amount of money at the end of the loan term, again making it not an amortized loan. Therefore, option C is the correct answer as it accurately describes the characteristics of an amortized note.