Loans, Mortgages, and Amortizations
Goal: When our own future is at stake, most of us want to use every
effective approach we can find. The mathematical mode of thought is not
the only way to approach decisions, but the reasoned strategies that
mathematics illustrates are powerful tools that give us surprising strength
for analyzing and conquering life's issues.
From The Heart of Mathematics:
Here we apply these methods of thoughts to the decisions we will face in
life related to student loans, house and car buying.
The events described here all
actually happened, and the same language is used to describe them.
When a bank loans money it expects to make back what it
would have elsewhere, while we pay back in installments.
So we set up lump sum with the principal=loan for the banks earnings,
and solve for our monthly payment needed to reach that amount via