Gce Model Questions Vol1 2017 Commerce Question 14

Practice objective / multiple choice question 14 from the 2017 Gce Model Questions Vol1 Commerce examination.

Gce Model Questions Vol1 2017 Commerce Objective / Multiple Choice Medium Difficulty
Question 14 GCE_MODEL_QUESTIONS_VOL1 • 2017 • COMMERCE • objective

A business borrows ₦5,000,000 from a bank at a nominal annual interest rate of 12 % payable monthly. The bank deducts an arrangement fee of 1.5 % of the loan amount from the proceeds. The loan is to be repaid in equal monthly instalments over 3 years. If the loan is repaid early after 18 months, a penalty of 0.3 % of the outstanding principal is charged at the time of repayment. Calculate (a) the monthly instalment amount, (b) the total amount paid up to the early repayment (including the penalty), and (c) the effective annual interest rate based on the actual cash received and the total payments made up to early repayment.

Answer Options

A. (a) ₦150,000 per month; (b) ₦2,850,000 total paid; (c) Effective annual rate ≈ -25 % (borrower gains about 25 % per annum)
B. (a) ₦170,000 per month; (b) ₦3,060,000 total paid; (c) Effective annual rate ≈ -35 % (borrower gains about 35 % per annum)
Correct Answer C. (a) ₦166,279 per month; (b) ₦3,001,185 total paid; (c) Effective annual rate ≈ -39 % (i.e., borrower gains about 39 % per annum)
D. (a) ₦180,500 per month; (b) ₦3,250,000 total paid; (c) Effective annual rate ≈ -45 % (borrower gains about 45 % per annum)
Correct Answer
C
Correct Option:
(a) ₦166,279 per month; (b) ₦3,001,185 total paid; (c) Effective annual rate ≈ -39 % (i.e., borrower gains about 39 % per annum)

About This Question

This is Gce Model Questions Vol1 2017 Commerce Question 14. It is one of the objective questions from the 2017 Gce Model Questions Vol1 Commerce examination.

Difficulty level: Medium .

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