Rhea lent P 100,000 today each to Perlyn, Kat and Regine under the following terms. (4) Kat agreed to repay this by 10 monthly payments of Q for a year but at 6% interest compounded semiannually. One of them paid more interest in total.

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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.