(6) Marian has just purchased a house. She has a $400,000, 20-year mortgage with interest at an annual rate of 4.5% a year, compounded continuously. Assuming Marian pays her mortgage continuously with a fixed amount: (a) How much is her monthly payment? (b) If she pays an extra $400 each month, how soon can she pay off the mortgage? (c) How much money can Marian save by paying an extra $400 each month?

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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.