M&M Bank granted a loan to a borrower on April 1, 2020. The interest on the loan is 10% payable annually starting March 31 2021. The loan matures in three years on March 31, 2023. Data related to the loan are:Principal amount - ₱ 4,000,000; Origination fees charged against the borrower - ₱ 342,100; Direct origination cost incurred - ₱ 150,000. After considering the origination fees charged against the borrower and the direct origination cost incurred, the effective rate on the loan is 12%. What is the Carrying value of the loan as of April 1, 2020?

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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.