lecture-02

# lecture-02 - CMSC-16100 Lecture 2 Let's do something a bit...

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CMSC-16100 Lecture 2 Let's do something a bit more interesting. .. Let's suppose you want to compute the monthly payment on a loan -- a house loan, a car loan, or perhaps even a student loan :-). There are a lot of ways we might approach this computationally, but we're going to do this the old fashioned way. We're going to think about it. .. What we want to do is to write a function payment years rateInPercent prinicipal Here we assume a standard loan, in which interest is compounded monthly. Let's try to discover an expression for the balance (b_n) after making the n-th payment, in terms of the monthly payment (m), the principal (p), and the interest rate (i). b_0 = p b_1 = p (1 + i/1200) - m b_2 = p (1 + i/1200)^2 - m (1 + i/1200) - m OK. The first thing we notice is that the term (1 + i/1200) occurs a lot. This is basically the result of converting the interest from percentage to unit-based, and from an incremental rate to a multiplier. So let's let j = (1 + i/1200) be the monthly interest multiplier. b_0 = p b_1 = p j - m b_2 = p j^2 - m j - m b_3 = p j^3 - m j^2 - m j - m = p j^3 - m (j^2 + j + 1) Now, at this point, we might recognize that m is being multiplied by a geometric series, and recall the identity j^k + j^(k-1) + . .. + j^2 + j + 1 = (j^(k+1) - 1)/(j-1) Note that this requires j != 1, i.e., a non-zero interest rate. So we might *conjecture* b_n = p j^n - m (j^n - 1) / (j-1) Now, when I was in college, induction from the first few examples was viewed as satisfactory for elementary education majors. I certainly don't mean to denegrate elementary education majors, but our mathematical standards are higher. Can we prove this? Yes, by induction.

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## This note was uploaded on 10/10/2009 for the course CMSC 16200 taught by Professor Kurtz during the Fall '09 term at UChicago.

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lecture-02 - CMSC-16100 Lecture 2 Let's do something a bit...

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