took out a mortgage of $347,000 three years ago to buy an apartment. The terms of the loan stipulated that monthly repayments were to be made over 30 years, with the first payment one month after taking out the loan. She has just made her 36th payment. The interest rate was 5.147% p.a. compounded semi-annually. These conditions were locked for seven years. Should Marie want to break the contract she would have to pay a penalty equal to four months of payments. Interest rates have now dropped to 4.147% p.a. compounded semi-annually. a. Should Marie break the contract? Show all supporting calculation

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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.