Neco 2018 Commerce Question 11
Practice objective / multiple choice question 11 from the 2018 Neco Commerce examination.
A retailer needs ₦500,000 cash to purchase inventory. He can either (a) obtain a bank loan that carries (12\%\) per annum simple interest payable at the end of 6 months and a processing fee equal to (2\%\) of the loan amount, or (b) issue a debenture that carries (10\%\) per annum payable semi‑annually and has an issuance cost of ₦5,000. Assuming the loan amount must be sufficient to cover both the purchase price and the processing fee, which financing option results in the lower total cost after 6 months? State the cheaper option.
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About This Question
This is Neco 2018 Commerce Question 11. It is one of the objective questions from the 2018 Neco Commerce examination.
Difficulty level: Medium .
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