EAR What is the effective annual rate (EAR) of a mortgage that is advertised at 12% (APR) over the next twenty years and paid with monthly payments? What is the effective annual rate (EAR) of the mortgage at 12% APR with monthly payments? % (Round to two decimal places.)

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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.