7. Bank loans

Short-term financing through bank loans

Consider this case:

Tangle Transcontinental Corp. needs to take out a one-year bank loan of $600,000 and has been offered several different terms. One bank has offered a loan with 11% simple interest that requires monthly payments. The loan principal will be paid back at the end of the year.

Based on a 360-day year, what will be the monthly payment for June? (Hint: Remember that June has 30 days.)

$4,950.00

$5,500.00

$4,400.00

$5,225.00

Another bank has offered 8% add-on interest to be repaid in 12 equal monthly installments. What is the monthly payment on this add-on interest loan?

$43,200.00

$54,000.00

$51,300.00

$48,600.00