Fahrin received a 100-day promissory note on 17th june 2008 with simple interest rate of 5% per annum. After 40 days he discounted the note at a discount rate of 3% and received proceeds of 12. 188.75 find the face value. and the amount of interest received by Fahrin.

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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.