A corporation takes out a $100,000 loan to be repaid over 6-years with quarterly payments at j₄ = 10%.Under the amortization method,the outstanding balance of the loan after 4 years is $40,090.26.At this time the company refinances the loan,without penalty.The new loan rate is j₄ = 8% and the company makes an additional lump sum payment of $5000.What is the new quarterly payment,assuming the loan is still paid back in full after 6 years?

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The correct answer is A.The outstanding balance after 4 years is $40,090.26. The company makes an additional lump sum payment of $5000, so the new outstanding balance is $40,090.26 - $5000 = $35,090.26. The new loan rate is j4 = 8%, so the new quarterly payment is $35,090.26 * (0.08 / 4) * (1 - (1 + 0.08 / 4)^(-8)) = $4790.16.

A Corporation Takes Out a $100,000 Loan to Be Repaid