Waec Model Questions Vol1 2018 Commerce Question 46

A small business needs ₦5,000,000 for expansion. It can raise funds from three sources: (i) retained earnings of ₦1,200,000 (no cost), (ii) a bank loan at 12% p.a. payable in equal annual installments over 5 years, and (iii) 10% debentures payable annually with the principal repaid at the end of 5 years. At least 40% of the total capital must be raised from long‑term external sources (bank loan or debentures) and the amount raised through debentures cannot exceed 30% of the total capital. Determine the amounts to be borrowed via the bank loan and via debentures that satisfy the constraints and give the minimum total interest payable over the 5‑year period. State the minimum total interest (in Naira).