## (solution) You plan to take out a 30-year fixed rate mortgage for \$125,000.

You plan to take out a 30-year fixed rate mortgage for \$125,000. Let P(r) be your monthly payment if the interest rate is r% per year, compounded monthly. Interpret the equations

(a) P(7) = 831.63 and (b) P'(7 ) = 83.95.

(a) Interpret P(7)equals831.63. Select the correct answer below

A. If the interest rate on the mortgage is 8%, the monthly payment will be \$831.63.

B. If the interest rate on the mortgage is 7%, the monthly payment will be \$83.95.

C. If the interest rate on the mortgage is 8%, the monthly payment will be \$83.95.

D. If the interest rate on the mortgage is 7%, the monthly payment will be \$831.63.

(b) InterpretP'(7) = 83.95.

A. If the interest rate increases from 7% to 8%, the monthly payment will decrease by approximately \$83.95

B. If the interest rate decreases from 8% to 7%, the monthly payment will be approximately \$831.63

C. If the interest rate increases from 7% to 8%, the monthly payment will increase by approximately \$83.95

D. If the interest rate decreases from 8% to 7%, the monthly payment will increase by approximately \$831.63.

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