Gce Model Questions Vol1 2020 Commerce Question 35

Practice objective / multiple choice question 35 from the 2020 Gce Model Questions Vol1 Commerce examination.

Gce Model Questions Vol1 2020 Commerce Objective / Multiple Choice Medium Difficulty
Question 35 GCE_MODEL_QUESTIONS_VOL1 • 2020 • COMMERCE • objective

A business needs a loan of \(\text{₦}5{,}000{,}000\) for 3 years. Bank X offers a nominal annual rate of 12\% compounded quarterly and charges an upfront processing fee of 1\% of the loan amount. Bank Y offers a nominal annual rate of 10\% compounded annually and charges a yearly service fee of \(\text{₦}50{,}000\) payable at the end of each year. Which bank results in the lower total cost of borrowing? Show the total amount repaid to each bank (including all fees and interest) and indicate the cheaper option.

Answer Options

A. Bank X; total repayment = ₦7,200,000 (Bank Y total = ₦6,750,000)
B. Bank X; total repayment = ₦7,050,000 (Bank Y total = ₦6,900,000)
C. Bank Y; total repayment = ₦6,950,000 (Bank X total = ₦7,100,000)
Correct Answer D. Bank Y; total repayment = ₦6,805,000 (Bank X total = ₦7,175,000)
Correct Answer
D
Correct Option:
Bank Y; total repayment = ₦6,805,000 (Bank X total = ₦7,175,000)

About This Question

This is Gce Model Questions Vol1 2020 Commerce Question 35. It is one of the objective questions from the 2020 Gce Model Questions Vol1 Commerce examination.

Difficulty level: Medium .

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