You plan to take out a 30-year fixed rate
Question
You plan to take out a 30-year fixed rate
mortgage for $200,000. Let P(r) be your monthly payment if the interest rate is r% per year, compounded monthly. Interpret the equations (a) P(2)=739.24 and (b) P′(2)=100.01.
(a) Interpret P(2)=739.24. Select the correct answer below.
A. If the interest rate on the mortgage is 2%, the monthly payment will be $739.24.
B. If the interest rate on the mortgage is 3%, the monthly payment will be $739.24.
C. If the interest rate on the mortgage is 3%, the monthly payment will be $100.01.
D. If the interest rate on the mortgage is 2%, the monthly payment will be $100.01.
(b) Interpret P′(2)=100.01. Select the correct answer below.
A. If the interest rate increases from 2% to 3%, the monthly payment will increase by approximately $100.01.
B. If the interest rate decreases from 3% to 2%, the monthly payment will be approximately $739.24.
C. If the interest rate increases from 2% to 3%, the monthly payment will decrease by approximately $100.01.
D. f the interest rate decreases from 3% to 2%, the monthly payment will increase by approximately $739.24.
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