Frankie borrows $200 000 from a bank. The loan is to be repaid over 23 years at a rate of 7.2% per annum, compounded monthly. The repayments have been set at $1485 per month.
The interest charged and the balance owing for the first three months of the loan are shown in the spreadsheet below.
- What are the values of `A` and `B`? (2 marks)
- After 50 months of repaying the loan, Frankie decides to make a lump sum payment of $ 40 000 and to continue making the monthly repayments of $1485. The loan will then be fully repaid after a further 146 monthly repayments.
- How much less will Frankie pay overall by making the lump sum payment? (3 marks)