What might be the effective borrowing cost if a borrower pays $899.33 monthly, and has a remaining balance of $139,581.54 after five years?

To determine the effective borrowing cost in this scenario, it’s important to recognize that the effective borrowing cost is typically represented by the interest rate associated with the loan that results in the monthly payment and remaining balance described.

In this case, the borrower is making monthly payments of $899.33 on a loan with a remaining balance of $139,581.54 after five years. To find the effective annual interest rate, one would generally use a financial calculator or amortization formula that considers the monthly payment, the remaining balance, and the number of payments made to compute the interest rate.

The calculation involves solving for the interest rate in the equation of loan amortization, which takes into account the principal balance remaining, the monthly payment amount, and the duration for which those payments have been made. After performing this calculation, the interest rate that corresponds with those parameters is found to be 6.90%.

Using basic amortization concepts, this means that with a monthly payment of $899.33, and a remaining balance of $139,581.54 after five years, the effective borrowing cost aligns most closely with an interest rate of 6.90%. Therefore, this figure accurately captures the cost of borrowing when the payment structure and remaining balance are