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

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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