On Jan. 1, 2021, Angel Bank granted a loan to a borrower in the amount of P5,000,000. The interest rate on the loan is 10% payable annually starting Dec. 31, 2021. The loan matures in five years on Dec. 31, 2025. Angel Bank incurs P39,400 of direct loan origination cost and P10,000 of indirect loan origination cost. In addition, Angel Bank charges the borrower an 8-point nonrefundable loan origination fee. (Round off present value factors to four decimal places)

1. The effective interest rate of the loan is?

a. 10.00%

b. 12.00%

c. 11.94%

d. 9.80%

2. The interest income to be recognized in 2021 is?

a. 555,138

b. 556,728

c. 500,000

d. 493,861

3. The carrying amount of the loan as of Dec. 31, 2021?

a. 4,696,128

b. 5,033,261

c. 5,000,000

d. 4,704,538