with respect to each of the three $7,000 loans is shown in the following table. Each loan requires John to make one payment at the end of each year. a. Determine the interest rate associated with each of the loans. b. Which loan should John take?

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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.