Problem 2(Required, 40marks)Recently, a person borrows an amount $from the bank. You are given that

The borroweragrees to repay the loan by 4level monthly repayments made at the end of every month (The first repayment will be made 1 month after today).

The loan charges interest at constant monthlyeffective interest rate 0.62%.

The outstanding balance at (2)repayment date is $84224.35.

The outstanding balance at (3)repayment date is $44711.76.

(a)Calculate the amount of principal repaid at repayment date. Explain your answer.

(b)Suppose that the borrower changes the repayment schedule and decides to repay the loan by making monthly repayment with amount $1500 plus a drop payment made one month after the repayment.

Determine the amount of drop payment.

Provide full justification to your answer.