I am having trouble understanding conceptually the following DiffEq problem:(adsbygoogle = window.adsbygoogle || []).push({});

"Suppose you can afford no more than $500 per month of payment on a mortgage. The interest rate is 8% and the mortgage term is 20 yrs. If the interest is compounded continuously and payments are made continuously, what is the max. amount you can borrow and the total interest paid during the mortgage term?"

1) dA/dt = r*A

2) A(t)=A_0*e^rt

dA/dt is the rate of change of the value of the investment... would that just be the 500/month, and use that to find the original investment?

I'm not sure I understand... From the 2nd equation A'(t) = A_0*r*e^rt, but 500/month would be fixed so doesn't resemble A'(t)...

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# Homework Help: Financial DiffEq question

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