The graph and table below give the monthly principal and interest payments for a mortgage from 1999 to 2004. Use this information to predict the payment for 2005.
Year Payment
1999 $578
2000 613
2001 654
2002 675
2003 706
2004 730
2005
This is what I did..figured all the differences came up with 152, divided that by 5, gave me 30.4
then I added that to the last payment,
so my answer was 760
Is that correct?
I have never seen mortgage tables like that. It makes no sense to me at all. Normally mortgages are calculated so the payments are constant, the same every payment period, and a greater percentage of the payment becomes principal as the principal is paid down and the interest becomes less.
Give me more information. Is the interest rate changing? Why are the payments going up and down?
That is all the information I have
You method is as reasonable as any. If you had more observations, I would suggest some form of regression equation. However, 6 data points does not warrent such extravance.
It looks like an annually adjustable rate mortgage. It's about time for the payments to go down! No wonder the economy is a mess.
I agree with Damon. I answered this question about a week ago and suggested the method that you used.
To predict the payment for 2005, you can use the given data points from 1999 to 2004 to determine the pattern or trend in the payments over time.
One way to do this is to calculate the average increase per year in the payment amounts, and then use that average increase to predict the payment for 2005.
First, let's calculate the average increase in payments per year:
- From 1999 to 2000, the payment increased by $613 - $578 = $35.
- From 2000 to 2001, the payment increased by $654 - $613 = $41.
- From 2001 to 2002, the payment increased by $675 - $654 = $21.
- From 2002 to 2003, the payment increased by $706 - $675 = $31.
- From 2003 to 2004, the payment increased by $730 - $706 = $24.
Next, let's calculate the average increase per year by summing up these increases and dividing by the number of years:
Average increase = ($35 + $41 + $21 + $31 + $24) / 5 = $30.4
Now, to predict the payment for 2005, we can add this average increase to the payment in 2004:
Predicted payment for 2005 = $730 (payment in 2004) + $30.4 (average increase) = $760.4
Therefore, the predicted payment for 2005 is $760.4.