Mathe III Lecture 3 Mathe III Lecture 3 Mathe III Lecture 3 Mathe III Lecture 3
2 Mortgage Repayments Outstanding Balance At time t Repayment per period
3 Mortgage Repayments
4 The loan equals the present value of T payments of z
5 We found that: and:
6 For t-1 this becomes: Interest on last period’s principal Payment towards the principal
7 For t=1: For t=T: Interest: principal repayment: Interest: principal repayment: small large small large
8 Linear Equations with a Variable Coefficient
9
10 example The solution to: is: or:
11 The general solution becomes:
12 then: ( the present value, at t = 0, of $1 at t )
13
14 or: the present value at period 0 the present value at period t
15 Second Order Equations etc.
16 Existence and Uniqueness : The equation has a unique solution for any given
17 Example
18 Example
19 Example
20 Linear Equations The associated homogeneous equation:
21 Linear Equations { {{ { { { 0 0 The set of solutions is a linear space !!!
22 Linear Equations
23 Linear Equations
24 Linear Equations
25 Linear Equations
26 Linear Equations
27 We have shown that:
28 Proof: Lemma:
29 Proof (cntd.)
30 Proof (cntd.)