Gce Model Questions Vol1 2018 Commerce Question 8

Practice objective / multiple choice question 8 from the 2018 Gce Model Questions Vol1 Commerce examination.

Gce Model Questions Vol1 2018 Commerce Objective / Multiple Choice Medium Difficulty
Question 8 GCE_MODEL_QUESTIONS_VOL1 • 2018 • COMMERCE • objective

A small business needs ₦2,000,000 for 18 months. It can obtain financing by either (A) a bank loan with a nominal annual interest rate of 12 % payable monthly and a 2 % arrangement fee on the principal, or (B) an overdraft facility charged at 1.5 % per month on the average daily balance, with no fees but a minimum monthly repayment of ₦150,000. Assuming the full amount is drawn at the start and equal monthly repayments are made over the 18‑month period, which option results in the lower total cost? Calculate the total cost (interest plus any fees) for each option and state the cheaper one.

Answer Options

A. Option A is cheaper; total cost A = ₦240,000, total cost B = ₦260,000
B. Option B is cheaper; total cost A = ₦235,280, total cost B = ₦230,000
Correct Answer C. Option A is cheaper; total cost A = ₦235,280, total cost B = ₦250,000
D. Option A is cheaper; total cost A = ₦225,000, total cost B = ₦250,000
Correct Answer
C
Correct Option:
Option A is cheaper; total cost A = ₦235,280, total cost B = ₦250,000

About This Question

This is Gce Model Questions Vol1 2018 Commerce Question 8. It is one of the objective questions from the 2018 Gce Model Questions Vol1 Commerce examination.

Difficulty level: Medium .

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