Jones Stoneware has a liability of $75,000 due four years from today. The company is planning to make an initial deposit today into a savings account and then deposit an additional $10,000 at the end of each of the next four years. The account pays interest of 4.5 percent. How much does the firm need to deposit today for its savings to be sufficient to pay this debt?

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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.