Susan and Bill Stamp want to set up a TDA that will generate sufficient interest at maturity to meet their living expenses, which they project to be $1,200 per month. (Round your answers to the nearest cent.) (a) Find the amount needed at maturity to generate $1,200 per month interest, if they can get 7 1/4% interest compounded monthly. (b) Find the monthly payment that they would have to make into an ordinary annuity to obtain the future value found in part (a) if their money earns 9 3/4% and the term is twenty-five years.

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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.