$5\mathrm{.}3$ Consumer Loans and

Amortization Schedules $($continued$)$

Example $4$: Paying off a loan early!

Kay has just taken out a $$200,000,30-$year,$5\%,$

mortgage. She has heard from friends that if she

increases the size of her monthly payment by one$-$

twelfth of the monthly payment, she will be able to

pay off the loan much earlier and save a bundle on

interest costs. She is not convinced.

Use the necessary calculations to help convince her

that this is in fact true.