Neco Model Questions Vol1 2018 Commerce Question 6

Practice objective / multiple choice question 6 from the 2018 Neco Model Questions Vol1 Commerce examination.

Neco Model Questions Vol1 2018 Commerce Objective / Multiple Choice Medium Difficulty
Question 6 NECO_MODEL_QUESTIONS_VOL1 • 2018 • COMMERCE • objective

A bank offers a loan of \(\text{₦}500,000\) repayable in a single lump sum after 3 years. The loan carries a nominal annual interest rate of \(12\%\) convertible semi‑annually and a processing fee equal to \(2\%\) of the loan amount payable at the start. Another bank offers the same loan amount with an effective annual interest rate of \(11\%\) and no processing fee. Which bank provides the lower total cost to the borrower? State the total amount payable under each offer (rounded to the nearest naira) and indicate the cheaper option.

Answer Options

Correct Answer A. Bank B is cheaper; total cost ≈ ₦683,816 (Bank A total cost ≈ ₦719,257).
B. Bank A is cheaper; total cost ≈ ₦680,000 (Bank B total cost ≈ ₦718,000).
C. Bank A is cheaper; total cost ≈ ₦683,816 (Bank B total cost ≈ ₦719,257).
D. Bank B is cheaper; total cost ≈ ₦690,000 (Bank A total cost ≈ ₦720,000).
Correct Answer
A
Correct Option:
Bank B is cheaper; total cost ≈ ₦683,816 (Bank A total cost ≈ ₦719,257).

About This Question

This is Neco Model Questions Vol1 2018 Commerce Question 6. It is one of the objective questions from the 2018 Neco Model Questions Vol1 Commerce examination.

Difficulty level: Medium .

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