In each succeeding payment on an installment note: A)The amount that goes to interest expense increases.

In each succeeding payment on an installment note:

A)The amount that goes to interest expense increases.

B)The amount that goes to interest expense decreases.

C)The amount that goes to interest expense is unchanged.

D)The amounts paid for both interest and principal increase proportionately.

Answer: B)The amount that goes to interest expense decreases.

In a installment note, the normal amount is fixed all over on the time of the period of repayment. With every single payment made, an individual’s principal balance decreases and the borrower becomes closer to paying back the whole amount. Whereas interest is calculated based on the outstanding principal balance that stays constant in early stages, the interest portion of respective payments also reduces in each consecutive payout. Therefore, more portion of the payment is being directed towards the reduction of principal amount in each subsequent payment, hence leading to a decreasing interest expense with every additional payment made.