The monthly mortgage payment in dollars, P, for a house is a function of three variables P=f(A,r,N), where A is the amount borrowed in dollars, r is the interest rate, and N is the number of years before the mortgage is paid off.
(dP)/(dr)|_(95000,14,25)=72.70
What is the financial significance of the number 72.70?
This means that the rate of change of the monthly payment with respect to the amount borrowed is $72.70; i.e., the monthly payment will go up by approximately $72.70 for every $1000 borrowed amount increase for the $95,000 borrowed under a 25-year mortgage in the interest rate.
This means that the rate of change of the monthly payment with respect to the interest rate is $72.70; i.e., the monthly payment will go down by approximately $72.70 for every one percentage point increase in the interest rate for the $95,000 borrowed under a 25-year mortgage.
This means that the rate of change of the monthly payment with respect to the number of years before the mortgage is paid off is $72.70; i.e., the monthly payment will go up by approximately $72.70 for every one year increase in the number of years before the mortgage is paid off for the $95,000 borrowed at 14% interest rate.
This means that the rate of change of the monthly payment with respect to the interest rate is $72.70; i.e., the monthly payment will go up by approximately $72.70 for every one percentage point increase in the interest rate for the $95,000 borrowed under a 25-year mortgage.
This means that the rate of change of the monthly payment with respect to the number of years before the mortgage is paid off is $72.70; i.e., the monthly payment will go down by approximately $72.70 for every one year increase in the number of years before the mortgage is paid off for the $95,000 borrowed at 14% interest rate.