A civil engineering student borrowed P40,000 to meet college expenses during his senior year. He promised to repay the loan with interest at 4.5% in 10 equal semi-annual installments, the first payment to be made 3 years after the date of the loan. How much will be this payment?

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A:

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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.