What is an amortization table?

What is an amortization table?

• A. A schedule of payments showing the amounts of principal and interest that make up each payment.
• B. A list of loan interest rates over time.
• C. A chart of currency exchange rates.
• D. A summary of late payment penalties.

Answer: (A)

An amortization table is a schedule that shows, for each loan payment, how much goes toward interest and how much goes toward reducing the principal, along with the remaining loan balance after each payment. It helps you see exactly how the payment is split and how the loan balance shrinks over time, which in turn reveals the total interest paid over the life of the loan. In the early years, most of each payment covers interest, and as the balance falls, a larger portion goes to principal, accelerating payoff later on. This makes the concept clear that the table is a detailed breakdown of each payment into principal and interest. The other options don’t describe this breakdown or the changing balance: a list of interest rates over time, a chart of currency exchange rates, or a summary of late payment penalties.

An amortization table is a schedule that shows, for each loan payment, how much goes toward interest and how much goes toward reducing the principal, along with the remaining loan balance after each payment. It helps you see exactly how the payment is split and how the loan balance shrinks over time, which in turn reveals the total interest paid over the life of the loan. In the early years, most of each payment covers interest, and as the balance falls, a larger portion goes to principal, accelerating payoff later on. This makes the concept clear that the table is a detailed breakdown of each payment into principal and interest. The other options don’t describe this breakdown or the changing balance: a list of interest rates over time, a chart of currency exchange rates, or a summary of late payment penalties.