The Potters want to buy a small cottage costing $120,000 with annual insurance and taxes of $740 and $2200, respectively. They have saved $15,000 for a down payment, and they can get a 6%, 25-year mortgage from a bank. They are qualified for a home loan as long as the total monthly payment does not exceed $1000. Are they qualified? What is the total monthly payment?

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A: Conversion premium = $34 Conversion price = $25 Common stock price = $19.50 Face value = $1000

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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.