Question
If the average interest rate for a15-year fixed rate mortgage is 6.00%, then the corresponding30-year fixed rate is 8.37%. If the15-year rate decreases to 5.00%,
If the average interest rate for a15-year fixed rate mortgage is 6.00%, then the corresponding30-year fixed rate is 8.37%. If the15-year rate decreases to 5.00%, then the30-year rate decreases to 6.87%.
a. Assume that the relationship between the15-year fixed rate(%) and the30-year fixed rate(%) is linear. Find the equation of the line that describes this relationship. Write your answer inslope-intercept form. Let x be the15-year fixed rate and y be the30-year fixed rate.
b. Use your equation from part(a) to estimate the30-year fixed rate if the15-year fixed rate is 5.7%.
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