If the interest rate is 13% compunded semi-annually made on the account, and the obligations are given below: Deposit of P13,521 at the end of 3 and a half years. Withdrawal of P20,812 at the end of 5 years. Semi-annual deposit of a perpetuity of P1,200 starting at the end of 6 and a half years. Determine the following: a.) Present value of all the obligations made on the account. b.) Additional amount of withdrawal at the end of 5 years to balance the cash flows.   NOTE: DO NOT USE EXCEL

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A:

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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.