Neco 2018 Commerce Question 24

A company needs ₦10,000,000 for expansion. Option A: a 5‑year bank loan at an annual interest rate of \\(9\\%\\) payable annually, with a loan arrangement fee of \\(1\\%\\) of the loan amount and a processing fee of ₦150,000. Option B: issue 10‑year debentures with a nominal coupon rate of \\(8\\%\\) payable annually, incurring underwriting costs of \\(2\\%\\) of the issue amount and a registration fee of ₦200,000. Assuming the principal is repaid at maturity, compute the effective annual cost (total interest plus all fees spread over the term) for each option and state which option is cheaper. Express the effective annual cost as a percentage to one decimal place.