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Question
Suppose C(r) is the total cost of paying off a car loan borrowed at an annual interest rate of r%. What are the units of C'(r)? What is the practical meaning of C'(r)? What is its sign?
Solution
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1 of 2is the total cost of paying off a car loan borrowed at an annual interest rate of percent.
Units of are dollars per percent.
The practical meaning of depicts the additional amount needed to pay off the loan when the interest rate is increased by 1 percent.
The sign of is positive because increasing the interest rate will increase the amount that it costs to pay off the loan.
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