2. Chapter 3 Problem On January 1, 2020, John Jacob Dingleheimerschmidt borrowed $1,250.00 from the Friendly Finance Company. The loan is to be repaid in six equal installments due at the end of March, June, September, December, 2020, and March and June, 2021. If the Friendly Finance Company charges 20% interest, compounded quarterly: (Show your work.) А) What is the amount of each payment? B) What is the nominal interest rate? C) What is the effective interest rate?

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Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.