Theresa and Raul purchased a house for $200,000. They made a down payment of 15% of the purchase price and secured a 30 year conventional home mortgage at 5.8% per year compounded monthly on the unpaid balance. a. What is their monthly payment? N = 1% = PV = PMT= Calculator Display: Final Answer: N= 1% = PV = b. What is their outstanding principal after 10 years? PMT= FV = Calculator Display: Final Answer: P/Y = C/Y = PMT: FV = P/Y = 12 12 End 12 C/Y= 12 PMT: End c. The house is worth $380,000 after 10 years. How much equity do Teresa and Raul have in their house after 10 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.