Neco Model Questions Vol1 2020 Commerce Question 3

Practice objective / multiple choice question 3 from the 2020 Neco Model Questions Vol1 Commerce examination.

Neco Model Questions Vol1 2020 Commerce Objective / Multiple Choice Hard Difficulty
Question 3 NECO_MODEL_QUESTIONS_VOL1 • 2020 • COMMERCE • objective

A merchant takes a loan of \(\text{₦}1,200,000\) at a nominal annual rate of \(15\%\) compounded monthly. He plans to settle the loan after 18 months, but the bank imposes a pre‑payment penalty of \(2\%\) of the outstanding principal at the time of settlement. Calculate (i) the total amount the merchant must pay on settlement, and (ii) the effective annual interest rate he actually incurs over the 18‑month period.

Answer Options

A. Total payable ≈ ₦1,600,500; effective annual rate ≈ 18.3%
B. Total payable ≈ ₦1,530,710; effective annual rate ≈ 19.2%
C. Total payable ≈ ₦1,480,000; effective annual rate ≈ 16.9%
Correct Answer D. Total payable ≈ ₦1,530,710; effective annual rate ≈ 17.6\%
Correct Answer
D
Correct Option:
Total payable ≈ ₦1,530,710; effective annual rate ≈ 17.6\%

About This Question

This is Neco Model Questions Vol1 2020 Commerce Question 3. It is one of the objective questions from the 2020 Neco Model Questions Vol1 Commerce examination.

Difficulty level: Hard .

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