A business owner takes out a loan on July 1, 2022 for $20,000 to do a renovation. The bank charges 8.2% interest compounded semi-annually. The business owner wants to re-pay the loan starting on July 1, 2024 in semi-annual installments of $1,200. a) How many payments are needed to repay the loan in full? b) If the last payment is increased so that there is no final payment less than $1,200, what must that final payment be?

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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.