Neco 2023 Commerce Question 10

Practice objective / multiple choice question 10 from the 2023 Neco Commerce examination.

Neco 2023 Commerce Objective / Multiple Choice Medium Difficulty
Question 10 NECO • 2023 • COMMERCE • objective

A small business obtains a loan of \(\text{₦}2,000,000\) from a bank. The nominal annual interest rate is 12\% compounded monthly. The bank also charges a processing fee of 1.5\% of the loan amount, deducted from the loan proceeds. The loan is to be repaid in equal monthly instalments over 3 years. Determine (i) the monthly instalment amount (rounded to the nearest Naira) and (ii) the effective annual interest rate (EAR) that the borrower actually pays, taking the processing fee into account. Express the EAR as a percentage rounded to two decimal places.

Answer Options

Correct Answer A. Monthly instalment = 66,364 Naira; EAR = 13.75%
B. Monthly instalment = 64,200 Naira; EAR = 12.90%
C. Monthly instalment = 68,500 Naira; EAR = 14.20%
D. Monthly instalment = 66,364 Naira; EAR = 14.00%
Correct Answer
A
Correct Option:
Monthly instalment = 66,364 Naira; EAR = 13.75%

About This Question

This is Neco 2023 Commerce Question 10. It is one of the objective questions from the 2023 Neco Commerce examination.

Difficulty level: Medium .

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