Cleo runs her own silk-screening company. She needs new silk-screening printing machines, and finds two that will cost her, in total, \(\$ 5,489.00\). She takes out a 3 -year loan at \(8.9 \%\) interest. What was the cost of financing for Cleo?

Use the Cost of Financing. The difference between the total paid for a loan, along with all other charges paid to obtain the loan, and the original principal of the loan is the cost of financing. It measures how much more you paid for an item than the original price. In order to find the cost of financing, find the total paid over the life of the loan. Add to that any fees paid for the loan. Then subtract the principal.
Cost of Financing \(=\) Total of payments + fees - principal.