California Real Estate Practice Exam

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What characterizes an amortized note?

Variable interest rates
Balloon payments after five years
Monthly payments of principle and interest that pay off the loan with the last payment
One lump sum payment at the end of the loan term

The correct answer is: Monthly payments of principle and interest that pay off the loan with the last payment

An amortized note is a loan that is paid off in equal installments of principal and interest over a set period of time. Option A (variable interest rates) would result in fluctuating payments, making the loan not amortized. Option B (balloon payments after five years) would mean that the loan is not being paid off at a consistent rate, also making it not amortized. Option D (one lump sum payment at the end of the loan term) would result in the borrower owing a large amount of money at the end of the loan term, again making it not an amortized loan. Therefore, option C is the correct answer as it accurately describes the characteristics of an amortized note.