Waec Model Questions Vol1 2019 Commerce Question 9
Practice objective / multiple choice question 9 from the 2019 Waec Model Questions Vol1 Commerce examination.
A borrower is considering two loan offers for a principal amount of ₦5,000,000 to be repaid over 3 years. Offer A: nominal annual interest rate 10% compounded monthly, processing fee ₦50,000 payable at loan disbursement. Offer B: nominal annual interest rate 9% compounded quarterly, arrangement fee equal to 1% of the loan amount payable at the start, and a discount of ₦30,000 on the principal (the borrower receives ₦4,970,000 but must repay interest on the full ₦5,000,000). Assuming simple interest is used for the purpose of comparing total cost, calculate the effective annual rate (EAR) for each offer (to two decimal places) and state which offer results in the lower total cost to the borrower.
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About This Question
This is Waec Model Questions Vol1 2019 Commerce Question 9. It is one of the objective questions from the 2019 Waec Model Questions Vol1 Commerce examination.
Difficulty level: Hard .
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