Which term is used to describe the process of paying off a debt in regular installments over a period of time?

Which term is used to describe the process of paying off a debt in regular installments over a period of time?

• A. Amortization
• B. Balance Sheet
• C. FICA
• D. Cost Creep

Answer: (A)

Amortization describes paying off a debt in regular installments over time. Each payment typically includes both interest and principal, and as you continue making payments, the loan balance declines. The interest portion tends to shrink while the principal portion grows, which is why an amortization schedule shows changing allocations of each payment. This concept is about how loans are repaid and how the balance evolves over the term. The other terms don’t fit the scenario: a balance sheet is a snapshot of assets, liabilities, and equity at a specific moment; FICA is a payroll tax (Social Security and Medicare) in the United States; cost creep refers to rising costs over a project’s life due to scope changes.

Amortization describes paying off a debt in regular installments over time. Each payment typically includes both interest and principal, and as you continue making payments, the loan balance declines. The interest portion tends to shrink while the principal portion grows, which is why an amortization schedule shows changing allocations of each payment. This concept is about how loans are repaid and how the balance evolves over the term.

The other terms don’t fit the scenario: a balance sheet is a snapshot of assets, liabilities, and equity at a specific moment; FICA is a payroll tax (Social Security and Medicare) in the United States; cost creep refers to rising costs over a project’s life due to scope changes.