AMAT 110: MATHEMATICAL MODELLING

Problem Set 1

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Signature above printed name:

General instructions: This shall serve as the first page of your problem set. Print/write your
answers on a short bond paper/s. Erasures are NOT allowed. Deadline of submission is on Thurs-
day, 9 February 2017. Present your solutions neatly and completely. Box your final answers.

1. You wish to buy a new car and narrow your choices to a Jeep, Dodge, or a Hyundai. Each
company offers its best deal:

Jeep: for $13,990, make $1000 down then $ 3.5 % interest/month for up to 60 months
Dodge: for $13,550, make $1500 down then $ 4.5 % interest/month for up to 60 months
Hyundai: for $12,400, make $500 down then $ 6.5 % interest/month for up to 48 months

You can spend at most $600 a month on a car payment. Use a dynamical system to determine
which car to buy.

2. Your parents are considering a 30-year, $150,000 mortgage that charges 0.5% interest each
month. Formulate a model in terms of a monthly payment p that allows the mortgage (loan)
to be paid off after 360 payments.

(a) If an represents the amount owed after n months, what are a0 and a3 60? Use dynamical
system model only.
(b) Approximate the minimum value of p such that the mortgage will be paid off after 360
payments. Use Excel to generate numerical solutions and find p.

3. For the following problems, find the solution to the dynamical system and the equilibrium
value if one exists. Classify the equilibrium value as stable or unstable.

(a) an+1 = 3an + 4, a0 = 5 (b) an+1 = 2an 1, a0 = 3 (c) an+1 = an + 2, a0 = 1

4. You plan to invest part of your paycheck to finance your childrens education. You want to
have enough in the account to draw $1500 every month for 9 years beginning 25 years from
now. The account pays 0.4% interest each month.

(a) How much money will you need 25 years from now to accomplish the financial objective?
Assume you stop investing when your first child begins college.
(b) How much must you deposit each month during the next 25 years?
(c) Sketch the graph of the amount of money in your account from year 0 to year 34. (Use
MS Excel for the computations and the graph).