1. Using an amortization factor of 4.77415 per $1,000 (30 years at 4%), what is the monthly principal and interest payment on a $250,000 loan?
Answer & explanation
Answer: D. $250,000 / $1,000 = 250; 250 x 4.77415 = $1,193.54.
finance
amortization
Amortization is the gradual repayment of a loan through regular, scheduled payments that cover both interest and principal. In a fully amortized loan, each payment is the same, but early payments are mostly interest and later payments are mostly principal, so the balance reaches zero by the end of the term. An amortization schedule shows how each payment is split and the remaining balance after each one.
- Exam tip
- Monthly interest = balance x annual rate / 12; the rest of the payment reduces principal. Early payments are interest-heavy.
- Example
- On a $200,000 loan at 6%, the first month's interest is $200,000 x 0.06 / 12 = $1,000. With a $1,199 payment, $199 reduces principal.
Related terms & state variants
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Last verified: 2026-10-23