Neco 2020 Commerce Question 14

Practice objective / multiple choice question 14 from the 2020 Neco Commerce examination.

Neco 2020 Commerce Objective / Multiple Choice Medium Difficulty
Question 14 NECO • 2020 • COMMERCE • objective

A bank offers a loan of ₦500,000 with a nominal annual interest rate of \(12\%\) compounded quarterly. Another bank offers a discount loan where a discount of \(10\%\) is deducted from the face value up‑front and the borrower repays the full face value after one year. Calculate the effective annual rate for each loan and state which loan is cheaper for the borrower.

Answer Options

A. Loan A: 13.00 %; Loan B: 10.00 %; Discount loan is cheaper.
B. Loan A: 12.55 %; Loan B: 11.11 %; Discount loan is more expensive.
C. Loan A: 11.80 %; Loan B: 12.20 %; Discount loan is cheaper.
Correct Answer D. Loan A: 12.55 %; Loan B: 11.11 %; Discount loan is cheaper.
Correct Answer
D
Correct Option:
Loan A: 12.55 %; Loan B: 11.11 %; Discount loan is cheaper.

About This Question

This is Neco 2020 Commerce Question 14. It is one of the objective questions from the 2020 Neco Commerce examination.

Difficulty level: Medium .

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