Which of the Following Statements Regarding Negative Amortization in the Previous

Multiple Choice

Which of the following statements regarding negative amortization in the previous question is true?

A) The Year 3 payments are less than the interest assessed on the loan, so the outstanding balance at the end of Year 3 is higher than at the end of Year 2.
B) The Year 3 payments are more than the interest assessed on the loan, so the outstanding balance at the end of Year 3 is higher than at the end of Year 2.
C) The Year 3 payments are less than the interest assessed on the loan, so the outstanding balance at the end of Year 3 is lower than at the end of Year 2.
D) The Year 3 payments are more than the interest assessed on the loan, so the outstanding balance at the end of Year 3 is lower than at the end of Year 2.