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Mathcad in Economics

Last Updated on Saturday, 21 April 2012 17:10
Written by Evanish
Thursday, 09 December 2010 15:26

**Mathcad in Economics**

The housing industry is currently having an extremely high demand for both buying and renting. There are many issues to consider when obtaining a mortgage. Mathcad can be used to analyse the short and long term options and costs with involved in a mortgage to allow clients to see an overview of such a long term investment. Let’s take a look at the costs involved in obtaining a $350,000 mortgage loan on a 30 year term.

**Set up parameters of loan**

**Compute monthly payments**

**Payments through term of loan**

**Compute monthly payments**

To compute monthly payments, start with Loan amount and each month add interest and subtract payment.

**Compute principal and interest on each payment**

**Graph principal and interest paid for each month**

Initially payments are mostly interest but the graph crosses over when the payments and interest are equal. The trend reverses itself towards the end of the mortgage term where payments are higher than interest.

**Total interest paid**

Mathcad values are set as default to display 4 digits (3 decimal places) however this can be customised on a case to case basis by selecting either “Format/ Result” from the menu or double clicking on a displayed result. You can change the number of decimal places, the exponential threshold and even change the format to general, decimal, scientific, engineering, exponential and fraction. There is also the option to “Set as Default” which will update all numerical results automatically.

Mathcad is an extremely versatile and powerful tool within the economics industry in a variety of areas such a inventory analysis, budgeting, creating growth models, looking at optimisation, calculating interest and depreciation, and economic factors just to name a few. The display of information is also easy to read and follow and information can be represented visually, great for presentation and sharing of information. Mathcad’s calculations can be re-used and updated which is particularly useful in an industry where interest rates and other economic factors are constantly changing daily.