Question

46) A contour diagram of the monthly payment on a 5 year loan as a function of the interest rate and the amount borrowed is shown in the contour diagram. oan amount (S 8,000 7,000 6,000 120 ,000 ,000 s0 ,000 60 nterest 2,000 1357 9 11 13 15 r Suppose you borrow $5,000 and, since you have a bad credit rating, your loan payment is $100 per month. Suddenly, you get a job at Google and your credit rating jumps upward, so you are able to replace your loan by a new 5 year loan, where the new interest rate is 4% less than the old one. a) If your new loan is still for $5,000, estimate your new monthly payment (at the new lower interest rate) (b) If instead you want to borrow at the new interest rate but keep the same monthly payment you had for your old loan, estimate how much more can you borrow with your new loan

Answer 1

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