Math Question 8

A family in Melbourne purchased a house in October 2019. A local bank approved a loan of L = $500, DGD at a xed annual interest rate of r = 3.25% for this family to settle the purchase. The loan need to be paid over 25 years through monthly repayments of an equal amount m. (in dollars}. Note that m depends on 1" and is treated as a function of r denoted as mfr). (1) Calculate the monthly repayment amount m(r) when r = 3.25%. (2} Use the following rstorder approximation to approximate the monthly repayment if the interest rate is reduced by 0.25% [that means the interest rate becomes 3%}. m[r] m m(rn] + m'[rg) x (r To], where r = 3% and m = 3.25%