A mining firm must deposit funds in a “reclamation” account each quarter. The account must have $25 million on deposit when a project reaches its horizon in 10 years. The account pays interest at a rate of 2% per quarter. How much is the quarterly deposit?                                                                     (a) $41,500         (b) $172,575             (c) $228,325          (d) $414,000

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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.