The monthly mortgage payment in dollars, P, for a house is a function of three v

Question

The monthly mortgage payment in dollars, P, for a house is a function of three variables: P=f(A,r,N). Where A is the amount borrowed in dollars, r is the interest rate, and N is the number of years before the mortgage is paid off.

A) f(92000,14,30)=1090.08. What does this tell you, in financial terms?

B) P/r (92000,14,30) =72.82. What is the financial significance of the number 72.82?

C) Would you expect P/A to be positive or negative? Why?

D) Would you expect P/N to be positive or negative? Why?

Explanation / Answer

A) f(92000,14,30)=1090.08. What does this tell you, in financial terms?

monthly mortgage payment is 1090.08 dollars when amount borrowed =92000$, interest rate=14, and number of years before the mortgage is paid off=30

B) P/r (92000,14,30) =72.82. What is the financial significance of the number 72.82?

monthly mortgage payment increases by 72.82dollars when interest rate increases by 1 unit with A,N constant

C) Would you expect P/A to be positive or negative? Why?

P/A to be positive. with constant rate on interest r ,number of years N , montly repayment is increases when amount borrowed increases

D) Would you expect P/N to be positive or negative? Why?

P/N to be negative. with constant rate on interest r ,amount borrowed A , less amount to be payed montly   when number of years for repayment increases

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