Neco Model Questions Vol1 2018 Commerce Question 10
Practice objective / multiple choice question 10 from the 2018 Neco Model Questions Vol1 Commerce examination.
A small business can raise \(\text{₦}2,000,000\) for four years by either (A) a bank loan with a nominal annual interest rate of \(10\%\) payable annually and a processing fee of \(1\%\) of the loan amount, or (B) issuing 5‑year bonds with a face value of \(\text{₦}1,000\) each, sold at \(96\%\) of face value and paying an annual coupon of \(6\%\) of face value. The business needs exactly \(\text{₦}2,000,000\) in net proceeds. Which financing option results in the lower total interest cost over the four‑year period, and what is that total interest cost (rounded to the nearest naira)?
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About This Question
This is Neco Model Questions Vol1 2018 Commerce Question 10. It is one of the objective questions from the 2018 Neco Model Questions Vol1 Commerce examination.
Difficulty level: Medium .
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