Gce Model Questions Vol1 2025 Commerce Question 5

Practice objective / multiple choice question 5 from the 2025 Gce Model Questions Vol1 Commerce examination.

Gce Model Questions Vol1 2025 Commerce Objective / Multiple Choice Medium Difficulty
Question 5 GCE_MODEL_QUESTIONS_VOL1 • 2025 • COMMERCE • objective

A business takes a loan of \(\text{₦}1{,}000{,}000\) with a nominal annual interest rate of 12 % compounded monthly, to be repaid in equal monthly installments over 2 years. (a) Calculate the monthly installment amount. (b) Determine the effective annual rate (EAR) for this loan. (c) A credit‑card offers an APR of 13 % compounded daily (assume 365 days). Compute the EAR for the credit‑card. (d) Based on the EARs, which financing option has the lower effective cost?

Answer Options

A. Monthly installment ≈ 47075; Loan EAR ≈ 12.68%; Credit‑card EAR ≈ 13.89%; Lower cost = credit‑card
B. Monthly installment ≈ 48500; Loan EAR ≈ 13.10%; Credit‑card EAR ≈ 14.20%; Lower cost = credit‑card
Correct Answer C. Monthly installment ≈ 47075; Loan EAR ≈ 12.68%; Credit‑card EAR ≈ 13.89%; Lower cost = loan
D. Monthly installment ≈ 45200; Loan EAR ≈ 12.30%; Credit‑card EAR ≈ 13.45%; Lower cost = loan
Correct Answer
C
Correct Option:
Monthly installment ≈ 47075; Loan EAR ≈ 12.68%; Credit‑card EAR ≈ 13.89%; Lower cost = loan

About This Question

This is Gce Model Questions Vol1 2025 Commerce Question 5. It is one of the objective questions from the 2025 Gce Model Questions Vol1 Commerce examination.

Difficulty level: Medium .

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