The Simpsons are planning to purchase a new home. To do so, they will need to take out a 30-year home mortgage loan of $160,000 through Middletown Bank. Annual interest rates for 30-year mortgages at Middletown Bank are 5.75% compounded monthly. (a) Compute the Simpsons' monthly mortgage payment under this loan. (b) How much interest will the Simpsons pay over the life of the loan?

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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.