The monthly payment for a home loan is given by a function (P, r, N), where P

The monthly payment for a home loan is given by a function ƒ(P, r, N), where P is the principal (initial size of the loan), r the interest rate, and N the length of the loan in months. Interest rates are expressed as a decimal: A 6% interest rate is denoted by r = 0.06. If P = $100,000, r = 0.06, and N = 240 (a 20-year loan), then the monthly payment is ƒ(100,000, 0.06, 240) = 716.43. Furthermore, at these values, we have

Estimate:
(a) The change in monthly payment per $1000 increase in loan principal
(b) The change in monthly payment if the interest rate increases to r = 6.5% and r = 7%
(c) The change in monthly payment if the length of the loan increases to 24 years

Transcribed Image Text:

af : 0.0071, = af r = :5769, af N = -1.5467