The following table shows annual rates for various types of loans in 2021. Assume monthly payments and compounding periods. HINT [See Examples 5 and 7.] Loan 30-Year 15-Year Type Mortgage Mortgage Rate 3.03% New Car Used Car Loan Loan Credit Cards 2.30% 9.20% 9.45% 13.99% Four years into your 15-year $500,000 mortgage begun in 2021, you inherit your rich uncle's estate and decide to pay off the outstanding principal on your mortgage. What is that amount? Hint [Use the formula in the Before we go on discussion in Example 6.] (Do not round the payment amount to the nearest cent. Round the final outstanding principal to the nearest cent.) $ Need Help? Read It

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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.