Question

1. Charlie had taken out a personal loan of 50K in the beginning of the year with a co-signer. He promised his co-signer that he could make the money back in no time. He showed his co-signer the payments he planned to make with interest included. He and the bank agreed that he would pay 11% interest over 48 months. This means that the loan will actually amount to $55,500 and Charlie is paying $1,156.25 monthly.

a) How would you explain slope and y-intercept? When looking at a coordinate plane, we read from left to right. Many people remember the standard form of an equation being:

Y = mx + b

m represents the slope

And “+b” represents the y-intercept

This is nice. However, how is that useful for us?

What is slope?

What is y-intercept?

Answer 1

we can incorporate the straight line equation in multiple ways here:

a) we can plot the amount of money Charlie pays to the bank as a function of time. It starts with 0 at time=0, after 1 month he pays $1,156.25, after 2 months he pays another $1,156.25 so total $2312.5; and so on.

The y-intercept in this case would be 0 and the slope would be 1156.25/1 = 1156.25

b) another case can be when we see how the amount borrowed adds up to the total amount Charlie would eventually have to pay. Since it increases according to the rate of interest, it is interesting to see how interest rates affect the principal amount, and how taking a loan can add up to the money you have to repay.

At the beginning, it is $50000 (at time = 0) and hence the y-intercept.

At end of 48 months, it is a total of $55500. slope can be calculated as (55500-50000)/48 = $114.58/month

Please give a positive feedback if you like the answer