A loan of $12,000 is being repaid over 5-years with the following payment history:
• Quarterly payments of $769.77 for the first two years at j₄ = 10%
• Loan refinanced at j₄ = 8%,with quarterly payments dropping to $746.65 for one year
• Loan refinanced again,this time at j₄ = 6%
What is the outstanding balance of the loan at this point in time (after 3 years,with 8 payments remaining) ?

Question

Quizplus · Accepted Answer

The correct answer is A because the outstanding balance of the loan after 3 years, with 8 payments remaining, is $5469.57. This is calculated by using the formula for the future value of an annuity, which is:FV = PMT * [(1 + r)^n - 1] / rwhere:PMT is the payment amountr is the interest raten is the number of paymentsIn this case, the PMT is $746.65, the r is 6%, and the n is 8. Plugging these values into the formula, we get:FV = $746.65 * [(1 + 0.06)^8 - 1] / 0.06= $746.65 * [1.5938 - 1] / 0.06= $746.65 * 0.5938 / 0.06= $5469.57

A Loan of $12,000 Is Being Repaid Over 5-Years with the Following